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Import competition and firm refocusing

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  • Runjuan Liu
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    Abstract

    Recent theoretical work predicts a new margin of firm adjustment to trade liberalization; that is, multi-product firms alter their product mix to focus on their core competencies in response to trade liberalization. Using detailed product data from U.S. public firms, I find strong empirical support for this prediction. Specifically, import competition leads multi-product firms to drop peripheral products to refocus on core production. The weaker the linkages that a peripheral product shares with the core (as measured by the extent of joint sales, joint procurement, joint production, and joint sectorship), the more likely the peripheral product is to be divested in response to import competition.

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    Bibliographic Info

    Article provided by Canadian Economics Association in its journal Canadian Journal of Economics.

    Volume (Year): 43 (2010)
    Issue (Month): 2 (May)
    Pages: 440-466

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    Handle: RePEc:cje:issued:v:43:y:2010:i:2:p:440-466

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    Cited by:
    1. Leonardo Iacovone & Ferdinand Rauch & L. Alan Winters, 2010. "Trade as an Engine of Creative Destruction: Mexican Experience with Chinese Competition," CEP Discussion Papers dp0999, Centre for Economic Performance, LSE.
    2. Yue Ma & Heiwai Tang & Yifan Zhang, 2013. "Factor Intensity, Product Switching, and Productivity: Evidence from Chinese Exporters," Working Papers 09, Development and Policies Research Center (DEPOCEN), Vietnam.
    3. Liu, Runjuan & Rosell, Carlos, 2013. "Import competition, multi-product firms, and basic innovation," Journal of International Economics, Elsevier, vol. 91(2), pages 220-234.
    4. Damoun Ashournia & Jakob Munch & Daniel Nguyen, 2014. "The Impact of Chinese Import Penetration on Danish Firms and Workers," Economics Series Working Papers 703, University of Oxford, Department of Economics.
    5. Arita, Shawn & Hemanchandra, Dilini & Leung, PingSun, 0. "Can Local Farms Survive Globalization?," Agricultural and Resource Economics Review, Northeastern Agricultural and Resource Economics Association.

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