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Globalization and Multiproduct Firms

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  • Nocke, Volker
  • Yeaple, Stephen

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.

Suggested Citation

  • Nocke, Volker & Yeaple, Stephen, 2012. "Globalization and Multiproduct Firms," CEPR Discussion Papers 9037, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:9037
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    More about this item

    Keywords

    Diversification discount; Firm heterogeneity; Multiproduct firms; Productivity; Trade liberalization;
    All these keywords.

    JEL classification:

    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • F15 - International Economics - - Trade - - - Economic Integration

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