Globalization and Multiproduct Firms
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.
We would like to thank Felix Tintelnot for his help with the simulations. Volker Nocke gratefully acknowledges financial support from the German Science Foundation. Stephen Yeaple thanks the human capital foundation for support. The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research.
Volker Nocke & Stephen Yeaple, 2014. "Globalization And Multiproduct Firms," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 55, pages 993-1018, November. citation courtesy of