Multi-product Firms, R&D, and Growth
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Antonio Minniti
Multi-product firms dominate production activity in the global economy. There is widespread evidence showing that large corporations improve their efficiency by increasing the scale of their operations; this objective can be realized either by consistently investing in R&D or by expanding the product range. In this paper, we explore the implications of this fact by embedding multi-product firms in a General Equilibrium model of endogenous growth. We analyze an economy with oligopolistic firms that carry out in-house R&D programs in order to achieve cost-reducing innovations. Market structure is endogenous in the model and is jointly determined by the number of firms and the number of product varieties per firm. Both economies of scope and scale characterize the economic environment. We show that the market equilibrium involves too many firms (too much inter-firm diversity) and too few products per firm (too little intra-firm diversity); moreover, we find out that the total number of products and productivity growth are inefficiently low under laissez-faire. The nature of these distortions is discussed in detail.
©2011 Walter de Gruyter GmbH & Co. KG, Berlin/Boston
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Articles in the same Issue
- Frontiers Article
- 10.2202/1534-6021.1320
- Topics Article
- The Spirit of Capitalism and Asset Pricing: An Empirical Investigation
- Structural Factor-Augmented VARs (SFAVARs) and the Effects of Monetary Policy
- How Would an Appreciation of the Renminbi Affect the U.S. Trade Deficit with China?
- Multi-product Firms, R&D, and Growth
- Money Creation in a Random Matching Model
- Stochastic Capital Depreciation and the Co-movement of Hours and Productivity
- The Welfare Cost of Business Cycles in an Economy with Nonclearing Markets
- The Role of Government Commitment for Environmental Policy and Capital Movements
