The Comparative Advantage of Firms

Johannes Boehm, Swati Dhingra and John Morrow
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Swati Dhingra: CEP - LSE - Centre for Economic Performance - LSE - London School of Economics and Political Science, CEPR - Center for Economic Policy Research
John Morrow: King‘s College London, CEP - LSE - Centre for Economic Performance - LSE - London School of Economics and Political Science, CEPR - Center for Economic Policy Research

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Abstract: Resource-based theories propose that firms grow by diversifying into products that use common capabilities. We provide evidence for common-input capabilities, using a policy that removed entry barriers in input markets to show that the similarity of a firm's and an industry's input mix determines firm production choices. We model industry choice and economies of scope from input capabilities. When the model is estimated for Indian manufacturing, input complementarities make firms 5% more likely to produce in an industry and are quantitatively as important as time-invariant drivers of coproduction rates. Upstream entry barriers were equivalent to a 9.5% tariff on inputs.

Keywords: Multiproduct firms; firm capabilities; vertical input linkages; comparative advantage; economies of scope; size-based policies (search for similar items in EconPapers)
Date: 2021-07-16
New Economics Papers: this item is included in nep-com
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Published in Journal of Political Economy, 2021, 130 (12), ⟨10.1086/720630⟩

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Related works:
Journal Article: The Comparative Advantage of Firms (2022)
Working Paper: The comparative advantage of firms (2022)
Working Paper: The Comparative Advantage of Firms (2021)
Working Paper: The comparative advantage of firms (2019)
Working Paper: The Comparative Advantage of Firms (2019)
Working Paper: The comparative advantage of firms (2019)
Working Paper: The Comparative Advantage of Firms (2019)
Working Paper: The Comparative Advantage of Firms (2019)
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Persistent link: https://EconPapers.repec.org/RePEc:hal:spmain:hal-03877257

DOI: 10.1086/720630

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