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. Guided by several new stylized facts, we develop a theoretical model to determine optimal modes of market access at the firm–product level. We find that the most productive firms sell core varieties via foreign direct investment 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.