Multiproduct firms and scope adjustment in globalization

Larry D. QIU*, Wen ZHOU

*Corresponding author for this work

Research output: Journal PublicationsJournal Article (refereed)

24 Citations (Scopus)

Abstract

A model of heterogeneous firms with variety-specific fixed costs is developed and analyzed to study how multiproduct firms respond to globalization. In contrast with most existing models, the analysis demonstrates that more-productive firms may expand their product scope, which in turn may push up their average costs. A necessary and sufficient condition for scope expansion is that the fixed cost of introducing more varieties increases rapidly with the product scope. With increasing globalization, the percentage of scope-expanding firms diminishes and eventually becomes zero.
Original languageEnglish
Pages (from-to)142-153
Number of pages12
JournalJournal of International Economics
Volume91
Early online date30 Apr 2013
DOIs
Publication statusPublished - Sep 2013
Externally publishedYes

Keywords

  • Multiproduct firms
  • Globalization
  • Trade liberalization
  • Scope
  • Firm heterogeneity

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