NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Scale, Scope, and the International Expansion Strategies of Multiproduct Firms

Stephen Ross Yeaple

NBER Working Paper No. 19166
Issued in June 2013
NBER Program(s):   ITI

A growing literature seeks to understand how the characteristics of firms shape the manner in which they serve foreign markets. We consider an environment in which multiproduct firms can sell their products in multiple countries from multiple locations. We show that there are strong empirical regularities in the expansion strategies of U.S. multinational firms and that simple extensions of standard models do not explain these regularities. We augment these models by introducing a framework in which organizational capital is a scarce input within the firm that has to be allocated to particular products and production locations and show that the standard model, so amended, is consistent with the data. We then use the model to analyze the productivity effect of changes in international frictions both within and across firms.

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Document Object Identifier (DOI): 10.3386/w19166

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