Globalization and Multiproduct Firms

26 Pages Posted: 29 Oct 2014

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)

Date Written: November 2014

Abstract

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.

Suggested Citation

Nocke, Volker and Yeaple, Stephen R., Globalization and Multiproduct Firms (November 2014). International Economic Review, Vol. 55, Issue 4, pp. 993-1018, 2014. Available at SSRN: https://ssrn.com/abstract=2516095 or http://dx.doi.org/10.1111/iere.12080

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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