Working Papers"The Strategic Value of Large Domestic Firms: Theory and Evidence" (job market paper)
In this paper, I formalize and quantify a first-mover advantage for domestic firms that generates home-bias patterns. I extend firms' choices to include demand-enhancing investments and show that, relative to a benchmark where all firms invest simultaneously, there is an overinvestment by domestic firms. Thus, firms skew resources to their local markets and crowd out foreign firms. For the theoretical analysis, Unlike standard two-stage oligopolies with no entry, the result is independent of the type of competition (prices or quantities). To analyze the mechanism theoretically, I develop a tractable framework that incorporates large firms making multiple choices and accounts for extensive-margin adjustments and firm heterogeneity. For the empirics, I adapt the general model to a structural one and estimate it using a rich dataset at the firm-product level of all the Danish manufacturing industries. The results indicate that first-mover advantages are important in shaping the structure of the economy and as explanation of home-bias patterns, exhibing a lot of heterogeneity across industries and firms.
"New Trade Models and the Absence of the Pro-Competitive Effects of Import Competition"