Multiple-Product Firms and Product Switching
American Economic Review
vol. 100,
no. 1, March 2010
(pp. 70-97)
Abstract
This paper examines the frequency, pervasiveness, and determinants of product switching by US manufacturing firms. We find that one-half of firms alter their mix of five-digit SIC products every five years, that product switching is correlated with both firm- and firm-product attributes, and that product adding and dropping induce large changes in firm scope. The behavior we observe is consistent with a natural generalization of existing theories of industry dynamics that incorporates endogenous product selection within firms. Our findings suggest that product switching contributes to a reallocation of resources within firms toward their most efficient use. (JEL L11, L21, L25, L60)Citation
Bernard, Andrew B., Stephen J. Redding, and Peter K. Schott. 2010. "Multiple-Product Firms and Product Switching." American Economic Review, 100 (1): 70-97. DOI: 10.1257/aer.100.1.70Additional Materials
JEL Classification
- L11 Production, Pricing, and Market Structure; Size Distribution of Firms
- L21 Business Objectives of the Firm
- L25 Firm Performance: Size, Diversification, and Scope
- L60 Industry Studies: Manufacturing: General