Premium
GLOBALIZATION AND MULTIPRODUCT FIRMS
Author(s) -
Nocke Volker,
Yeaple Stephen
Publication year - 2014
Publication title -
international economic review
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 2.658
H-Index - 86
eISSN - 1468-2354
pISSN - 0020-6598
DOI - 10.1111/iere.12080
Subject(s) - globalization , scope (computer science) , productivity , portfolio , industrial organization , economies of scope , economics , marginal cost , work (physics) , business , microeconomics , international trade , economies of scale , market economy , macroeconomics , financial economics , mechanical engineering , computer science , engineering , programming language
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, whereas others are potentially testable.