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. 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"