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Globalization and Multiproduct Firms
Author(s) -
Volker Nocke,
Stephen R. Yeaple
Publication year - 2013
Language(s) - English
Resource type - Reports
DOI - 10.3386/w19409
Subject(s) - globalization , economic geography , business , industrial organization , economics , market economy
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.