The Comparative Advantage of Firms

John Morrow; Swati Dhingra; Johannes Boehm

doi:10.1086/720630

The Comparative Advantage of Firms

John Morrow, Swati Dhingra, Johannes Boehm

Economics

Research output: Contribution to journal › Article › peer-review

9 Citations (Scopus)

Abstract

Resource-based theories propose that firms grow by diversifying into products that use common capabilities. We provide evidence for commoninput 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.

Original language	English
Pages (from-to)	3025-3100
Number of pages	76
Journal	JOURNAL OF POLITICAL ECONOMY
Volume	130
Issue number	12
DOIs	https://doi.org/10.1086/720630
Publication status	Published - Dec 2022

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10.1086/720630

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abstract = "Resource-based theories propose that firms grow by diversifying into products that use common capabilities. We provide evidence for commoninput capabilities, using a policy that removed entry barriers in input markets to show that the similarity of a firm{\textquoteright}s and an industry{\textquoteright}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.",

author = "John Morrow and Swati Dhingra and Johannes Boehm",

note = "Funding Information: for helpful comments. An earlier version of the paper was titled “Swimming Upstream: Input-Output Linkages and the Direction of Product Adoption.” Boehm thanks the Sciences Po/Banque de France partnership for financial assistance and the International Economics Section at Princeton for hospitality. Morrow thanks the London School of Economics–Tata Institute of Social Sciences–Tata grant for financial assistance. Dhingra thanks the European Research Council for financial assistance under Starting Grant 760037. Shania Bhalotia and Yan Liang provided excellent research assistance. Replication files are available in a zip file. This paper was edited by Chad Syverson. Publisher Copyright: {\textcopyright} 2022 The University of Chicago. All rights reserved. Published by The University of Chicago Press.",

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doi = "10.1086/720630",

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AU - Boehm, Johannes

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The Comparative Advantage of Firms

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