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The comparative advantage of firms

Dhingra, Swati (2022) The comparative advantage of firms. Journal of Political Economy. ISSN 0022-3808

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Identification Number: 10.1086/720630


Resource based theories propose that firms grow by diversifying into products which 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 industry’s input mix determine firm production choices. We model industry choice and economies of scope from input capabilities. Estimating the model 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 co-production rates. Upstream entry barriers were equivalent to a 9.5% tariff on inputs.

Item Type: Article
Official URL:
Additional Information: © 2022 The University of Chicago
Divisions: Economics
Subjects: H Social Sciences > HD Industries. Land use. Labor
H Social Sciences > HF Commerce
Date Deposited: 18 May 2022 13:57
Last Modified: 14 Jun 2022 09:18

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