The comparative advantage of firms

Boehm, Johannes, Dhingra, Swati ORCID: 0000-0001-5468-3415 and Morrow, John (2022) The comparative advantage of firms. Journal of Political Economy, 130 (12). 3025 - 3100. ISSN 0022-3808

Text (Draft050821) - Accepted Version Available under License Creative Commons Attribution Non-commercial. Download (719kB)

• Author
• Author
• Author

Abstract

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:	https://www.journals.uchicago.edu/toc/jpe/current
Additional Information:	© 2022 The University of Chicago
Divisions:	Centre for Economic Performance Economics
Subjects:	H Social Sciences > HD Industries. Land use. Labor H Social Sciences > HF Commerce
Date Deposited:	18 May 2022 13:57
Last Modified:	11 Feb 2025 20:42
URI:	http://eprints.lse.ac.uk/id/eprint/115137

Actions (login required)

View Item