Horizontal expansion through an increasing product portfolio lies at the core of modern endogenous growth literature. I document that diversified firms shift investment toward embedded intangibles (organizational capital, brand value) at the expense of transferable intangibles (patents, software). This strategic reallocation is accompanied by declining markups and productivity, and reduced innovation by rivals. In an extended endogenous-growth framework, embedded intangibles drive horizontal expansion but raise entry barriers and decrease social returns, ultimately sacrificing economy-wide growth for firm-level advantages.

Using Turkish administrative firm-to-firm transaction data, we study how acquisitions affect target firms and their production networks. We find that acquisitions increase intangible intensity but have no consistent effects on conventional performance measures. Network consequences depend on acquirer origin: domestic acquisitions strengthen existing relationships, while foreign acquisitions promote outsourcing and diversification. We attribute these differences to variation in firms’ relationship capability.

This paper integrates models of skill-biased technological change and international trade to examine how globalization and rising skilled-labor availability affect intangible investment and reshape firm dynamics. I show that the interaction between ICT diffusion, trade liberalization, and skill supply reallocates resources toward intangible-intensive activities, amplifies firm-level heterogeneity, and changes entry, exit, and growth patterns.