Horizontal expansion through an increasing product portfolio lies at the core of modern endogenous growth literature. Yet evidence remains limited on how diversification across industries influences a firm’s trade-off between generating social surplus and capturing private returns.

We examine the production network effects of domestic vs. foreign acquisitions of Turkish firms. Following foreign (but not domestic) acquisitions, we observe an erosion of the acquired firms’ markup, that is compensated by increased markups of those firms’ upstream sellers.

The ICT (Information and Communication Technologies) revolution has been a principal driver of increased intangible investment and the accumulation of intangible assets. However, this development did not occur in isolation: it coincided with an expanding supply of skilled labor and an acceleration of globalization.