Multinationals, Technology, and the Introduction of Varieties of Goods / Irene Brambilla.

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Brambilla, Irene

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National Bureau of Economic Research

Material type: Text

TextSeries: Working Paper Series (National Bureau of Economic Research) ; no. w12217.Publication details: Cambridge, Mass. National Bureau of Economic Research 2006.Description: 1 online resource: illustrations (black and white)Subject(s):

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Abstract: Multiproduct firms and product turnover are widespread phenomena. This paper develops a theoretical framework that links advantages in R&D and variable costs with firm's ability to expand its portfolio of products. The framework is then applied to explain systematic differences in product introduction by affiliates of multinationals and firms that only operate domestically. Using firm-level data for the Chinese manufacturing sector during 1998-2000, I compare the performance of foreign and domestic firms in terms of the new varieties that they introduce and I estimate the quantitative relevance of technological factors as a determinant.Abstract: I find that firms with more than 50 percent of foreign ownership introduce on average more than twice as many more new varieties of goods as private domestic firms. Advantages in productivity account for 32 to 62 percent of the difference in the number and sales of new varieties, while advantages in the cost of development account for 3 to 6 percent of these differences.

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Previous	nber w12214 Portfolio Choice in a Monetary Open-Economy DSGE Model /	nber w12215 Expenditure Switching vs. Real Exchange Rate Stabilization: Competing Objectives for Exchange Rate Policy /	nber w12216 Measuring and Explaining Management Practices Across Firms and Countries /	nber w12217 Multinationals, Technology, and the Introduction of Varieties of Goods /	nber w12218 Baumol's Diseases: A Macroeconomic Perspective /	nber w12219 Are Valuation Effects Desirable from a Global Perspective? /	nber w1222 Economic and Statistical Analysis of Discrimination in Hiring /	Next

May 2006.

Multiproduct firms and product turnover are widespread phenomena. This paper develops a theoretical framework that links advantages in R&D and variable costs with firm's ability to expand its portfolio of products. The framework is then applied to explain systematic differences in product introduction by affiliates of multinationals and firms that only operate domestically. Using firm-level data for the Chinese manufacturing sector during 1998-2000, I compare the performance of foreign and domestic firms in terms of the new varieties that they introduce and I estimate the quantitative relevance of technological factors as a determinant.

I find that firms with more than 50 percent of foreign ownership introduce on average more than twice as many more new varieties of goods as private domestic firms. Advantages in productivity account for 32 to 62 percent of the difference in the number and sales of new varieties, while advantages in the cost of development account for 3 to 6 percent of these differences.