Globalization and Multiproduct Firms

33 Pages Posted: 28 Sep 2012

See all articles by Volker Nocke

Volker Nocke

University of Mannheim

Stephen R. Yeaple

Pennsylvania State University - College of the Liberal Arts - Department of Economic; National Bureau of Economic Research (NBER)

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Date Written: July 2012

Abstract

We present an international trade model of multiproduct firms where firms differ in their endowment of managerial resources and in how effectively these resources can be used in making production more efficient. The model gives rise to a trade-off between conglomerate and specialization strategies of firms, yielding testable predictions on the relationship between firm size, scope and productivity. More efficient firms become exporters, but not all exporters are large and not all large firms export. Following a trade liberalization, non-exporters experience a fall in their market-to-book ratio and consolidate the number of products they manage to lower their marginal costs while the opposite holds for exporters.

Keywords: diversification discount, firm heterogeneity, multiproduct firms, productivity, trade liberalization

JEL Classification: F12, F15

Suggested Citation

Nocke, Volker and Yeaple, Stephen R., Globalization and Multiproduct Firms (July 2012). CEPR Discussion Paper No. DP9037. Available at SSRN: https://ssrn.com/abstract=2153468

Volker Nocke (Contact Author)

University of Mannheim ( email )

Stephen R. Yeaple

Pennsylvania State University - College of the Liberal Arts - Department of Economic ( email )

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