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Globalization and Multiproduct Firms

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  • Nocke, Volker
  • Yeaple, Stephen

Abstract

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.

Suggested Citation

  • Nocke, Volker & Yeaple, Stephen, 2013. "Globalization and Multiproduct Firms," Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems 408, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich.
    • Handle: RePEc:trf:wpaper:408
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    References listed on IDEAS

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    1. Bernard, Andrew B. & Bradford Jensen, J., 1999. "Exceptional exporter performance: cause, effect, or both?," Journal of International Economics, Elsevier, vol. 47(1), pages 1-25, February.
    2. Volker Nocke & Stephen Yeaple, 2008. "An Assignment Theory of Foreign Direct Investment," Review of Economic Studies, Oxford University Press, vol. 75(2), pages 529-557.
    3. Andrew B. Bernard & J. Bradford Jensen & Stephen J. Redding & Peter K. Schott, 2007. "Firms in International Trade," Journal of Economic Perspectives, American Economic Association, vol. 21(3), pages 105-130, Summer.
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    5. Costas Arkolakis & Marc-Andreas Muendler, 2010. "The Extensive Margin of Exporting Products: A Firm-level Analysis," CESifo Working Paper Series 3309, CESifo Group Munich.
    6. Andrew B. Bernard & Stephen J. Redding & Peter K. Schott, 2010. "Multiple-Product Firms and Product Switching," American Economic Review, American Economic Association, vol. 100(1), pages 70-97, March.
    7. Alla Lileeva & Daniel Trefler, 2010. "Improved Access to Foreign Markets Raises Plant-level Productivity…For Some Plants," The Quarterly Journal of Economics, Oxford University Press, vol. 125(3), pages 1051-1099.
    8. 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.
    9. Carsten Eckel & J. Peter Neary, 2010. "Multi-Product Firms and Flexible Manufacturing in the Global Economy," Review of Economic Studies, Oxford University Press, vol. 77(1), pages 188-217.
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    11. 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, February.
    12. Davis, Donald R. & Harrigan, James, 2011. "Good jobs, bad jobs, and trade liberalization," Journal of International Economics, Elsevier, vol. 84(1), pages 26-36, May.
    13. Andrew B. Bernard & Stephen J. Redding & Peter K. Schott, 2011. "Multiproduct Firms and Trade Liberalization," The Quarterly Journal of Economics, Oxford University Press, vol. 126(3), pages 1271-1318.
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    18. Sutton, John, 2012. "Competing in Capabilities: The Globalization Process," OUP Catalogue, Oxford University Press, number 9780199274536.
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    1. repec:eee:reecon:v:71:y:2017:i:4:p:675-689 is not listed on IDEAS
    2. Eckel, Carsten & Iacovone, Leonardo & Javorcik, Beata & Neary, J. Peter, 2015. "Multi-product firms at home and away: Cost- versus quality-based competence," Journal of International Economics, Elsevier, vol. 95(2), pages 216-232.
    3. Carsten Eckel & Leonardo Iacovone & Beata Javorcik & J. Peter Neary, 2016. "Testing the Core-competency Model of Multi-product Exporters," Review of International Economics, Wiley Blackwell, vol. 24(4), pages 699-716, September.
    4. Andrea Ariu & Florian Mayneris & Mathieu Parenti, 2018. "One way to the top : How services boost the demand for goods," Working Paper Research 340, National Bank of Belgium.
    5. Larry Qiu & Miaojie Yu, 2014. "Multiproduct Firms, Export Product Scope, and Trade Liberalization: The Role of Managerial Efficiency," Working Papers 022014, Hong Kong Institute for Monetary Research.
    6. Tan, Yong, 2016. "The Impact of Demand Shocks on Firm-Level Offshoring Behavior: Theory and Evidence," MPRA Paper 73734, University Library of Munich, Germany.
    7. repec:eee:eecrev:v:94:y:2017:i:c:p:71-89 is not listed on IDEAS
    8. Eckel, Carsten & Irlacher, Michael, 2017. "Multi-product offshoring," European Economic Review, Elsevier, vol. 94(C), pages 71-89.
    9. Hu, Cui & Tan, Yong, 2017. "Learning to Import From Neighbors," MPRA Paper 78108, University Library of Munich, Germany.
    10. Tan, Yong & Han, Jian & Ma, Yeqing, 2015. "Multi-product firms, product scope, and the policy of export tax rebate," China Economic Review, Elsevier, vol. 35(C), pages 33-46.
    11. Juan de Lucio & Raúl Mínguez & Asier Minondo & Francisco Requena, 2018. "The variation of export prices across and within firms," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 154(2), pages 327-346, May.
    12. Pablo D. Fajgelbaum, 2013. "Labor Market Frictions, Firm Growth, and International Trade," NBER Working Papers 19492, National Bureau of Economic Research, Inc.
    13. repec:eee:reecon:v:71:y:2017:i:4:p:645-649 is not listed on IDEAS
    14. Lopresti, John, 2016. "Multiproduct firms and product scope adjustment in trade," Journal of International Economics, Elsevier, vol. 100(C), pages 160-173.
    15. Tan, Yong & Shao, Yuchen, 2016. "The Impact of Demand Shocks on Firm-Level Offshoring Behavior: Theory and Evidence," MPRA Paper 68728, University Library of Munich, Germany.

    More about this item

    Keywords

    multiproduct firms; trade liberalization; diversification discount; firm heterogeneity; productivity;

    JEL classification:

    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • F15 - International Economics - - Trade - - - Economic Integration

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