Product versus Process: Innovation Strategies of Multiproduct Firms

Lisandra Flach and Michael Irlacher

American Economic Journal: Microeconomics, 2018, vol. 10, issue 1, 236-77

Abstract: We investigate the effects of better access to foreign markets on innovation strategies of multiproduct firms in industries with different scope for product differentiation. Industry-specific demand and cost linkages induce a distinction between the returns to innovation. In differentiated industries, cannibalization is lower and firms invest more in product innovation. In homogeneous industries, firms internalize intra-firm spillovers and invest more in process innovation. Using firm-level data and large exchange rate devaluations, we show that better access to foreign markets increases the incentive to innovate. However, we exploit differential effects across industries and show that the innovation strategies depend on the scope of differentiation.

JEL-codes: D22 D25 F14 G31 L60 O14 O31 (search for similar items in EconPapers)
Date: 2018
Note: DOI: 10.1257/mic.20150272
References: Add references at CitEc
Citations: View citations in EconPapers (32)

Downloads: (external link)
https://www.aeaweb.org/articles?id=10.1257/mic.20150272 (application/pdf)
https://www.aeaweb.org/articles/attachments?retrie ... 2H3c2j3PnxaTapdDtIVu (application/zip)
https://www.aeaweb.org/articles/attachments?retrie ... tA4Tq9r_ppNbw-xle4aA (application/pdf)
https://www.aeaweb.org/articles/attachments?retrie ... _XnYCKkZG_5qMTQbGqmR (application/zip)
Access to full text is restricted to AEA members and institutional subscribers.

Related works:
Working Paper: Product versus Process: Innovation Strategies of Multi-Product Firms (2017)
Working Paper: Product versus Process: Innovation Strategies of Multi-Product Firms (2015)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:aea:aejmic:v:10:y:2018:i:1:p:236-77

Ordering information: This journal article can be ordered from
https://www.aeaweb.org/journals/subscriptions

Access Statistics for this article

American Economic Journal: Microeconomics is currently edited by Johannes Hörner

More articles in American Economic Journal: Microeconomics from American Economic Association Contact information at EDIRC.
Bibliographic data for series maintained by Michael P. Albert ().