Internationalization strategies of multi‐product firms: The role of technology

Abstract

High-performance firms typically have two features in common: i) they produce in more than one country and ii) they produce more than one product. In this paper, we analyze the internationalization strategies of multi-product firms at the product-level. We find that the most productive firms sell core varieties via foreign direct investment (FDI) and export products with intermediate productivity. Shocks to trade costs and technology affect the endogenous decision to export or produce abroad at the product-level and, in turn, the relative productivity between parents and affiliates.

Multi-Product Firms in International Economics

“…Hence, firms relocate high-cost varieties abroad as savings on factor costs are the highest for them. Baumgarten et al (2021) study optimal modes of market access at the firm-product level. Extending the setting of Helpman et al (2004) to MPFs, they show that the most productive firms engage in horizontal FDI for their core varieties and export varieties of an intermediate productivity level.…”