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Globalization and Multiproduct Firms

  • Nocke, Volker
  • Yeaple, Stephen

We present an international trade model with multiproduct firms. Firms are heterogeneously endowed with two types of capabilities that jointly determine the trade-off within firms between managing a large portfolio of products and producing at low marginal cost. The model can explain many of the documented cross- sectional correlations in firm performance measures, including why larger firms are more productive and more diversified, and yet more diversified firms trade at a discount. Globalization is shown to induce heterogeneous responses across firms in terms of scope and productivity, some of which are consistent with existing empirical work, while others are potentially testable.

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File URL: https://ub-madoc.bib.uni-mannheim.de/33985/1/Nocke_%26_Yeaple_13%2D10.pdf
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Paper provided by University of Mannheim, Department of Economics in its series Working Papers with number 13-10.

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Date of creation: 2013
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Handle: RePEc:mnh:wpaper:33985
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  1. Raghuram Rajan & Henri Servaes & Luigi Zingales, 2000. "The Cost of Diversity: The Diversification Discount and Inefficient Investment," Journal of Finance, American Finance Association, vol. 55(1), pages 35-80, 02.
  2. Andrew B. Bernard & Stephen Redding & Peter K. Schott, 2006. "Multi-product firms and trade liberalization," LSE Research Online Documents on Economics 3684, London School of Economics and Political Science, LSE Library.
  3. Eckel, Carsten & Neary, J. P., 2010. "Multi-product firms and flexible manufacturing in the global economy," Munich Reprints in Economics 20525, University of Munich, Department of Economics.
  4. Andrew B. Bernard & Stephen Redding & Peter K. Schott, 2010. "Multiple-product firms and product switching," LSE Research Online Documents on Economics 27861, London School of Economics and Political Science, LSE Library.
  5. Bernard, A., 1997. "Exceptional Exporter Performance: Cause, Effect, or Both?," Working papers 97-21, Massachusetts Institute of Technology (MIT), Department of Economics.
  6. Mark J. Melitz, 2002. "The Impact of Trade on Intra-Industry Reallocations and Aggregate Industry Productivity," NBER Working Papers 8881, National Bureau of Economic Research, Inc.
  7. Vojislav Maksimovic & Gordon Phillips, 2002. "Do Conglomerate Firms Allocate Resources Inefficiently Across Industries? Theory and Evidence," Journal of Finance, American Finance Association, vol. 57(2), pages 721-767, 04.
  8. Andrew B. Bernard & J. Bradford Jensen & Stephen Redding & Peter K. Schott, 2007. "Firms in International Trade," CEP Discussion Papers dp0795, Centre for Economic Performance, LSE.
  9. Alla Lileeva & Daniel Trefler, 2007. "Improved Access to Foreign Markets Raises Plant-Level Productivity ... for Some Plants," NBER Working Papers 13297, National Bureau of Economic Research, Inc.
  10. Hallak, Juan Carlos & Sivadasan, Jagadeesh, 2011. "Firms' Exporting Behavior under Quality Constraints," Working Papers 628, Research Seminar in International Economics, University of Michigan.
  11. Andrew Atkeson & Patrick J. Kehoe, 2005. "Modeling and measuring organization capital," Staff Report 291, Federal Reserve Bank of Minneapolis.
  12. Sutton, John, 2012. "Competing in Capabilities: The Globalization Process," OUP Catalogue, Oxford University Press, number 9780199274536, March.
  13. Belén Villalonga, 2004. "Diversification Discount or Premium? New Evidence from the Business Information Tracking Series," Journal of Finance, American Finance Association, vol. 59(2), pages 479-506, 04.
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