Scale, scope, and the international expansion strategies of multiproduct firms

Research output: Contribution to journalArticlepeer-review

Abstract

A growing literature seeks to understand how the characteristics of firms shape the manner in which they serve foreign markets. We consider an environment in which multiproduct firms can sell their products in multiple countries from multiple locations. We show that there are strong empirical regularities in the expansion strategies of U.S. multinational firms and that simple extensions of standard models do not explain these regularities. We augment these models by introducing a framework in which organizational capital is a scarce input within the firm that has to be allocated to particular products and production locations and show that the standard model, so amended, is consistent with the data. We then use the model to analyze the productivity effect of changes in international frictions both within and across firms.

Original languageEnglish (US)
Pages (from-to)1385-1413
Number of pages29
JournalReview of International Economics
Volume31
Issue number4
DOIs
StatePublished - Sep 2023

All Science Journal Classification (ASJC) codes

  • Geography, Planning and Development
  • Development

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