DP9037 Globalization and Multiproduct Firms
|Author(s):||Volker Nocke, Stephen R Yeaple|
|Publication Date:||July 2012|
|Keyword(s):||diversification discount, firm heterogeneity, multiproduct firms, productivity, trade liberalization|
|Programme Areas:||International Trade and Regional Economics|
|Link to this Page:||cepr.org/active/publications/discussion_papers/dp.php?dpno=9037|
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.