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Multi-Product Firms and Product Switching

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Author Info
Andrew B. Bernard
Stephen Redding
Peter K. Schott

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Abstract

This paper examines the frequency, pervasiveness and determinants of product switching among U.S.manufacturing firms. We find that two-thirds of firms alter their mix of five-digit SIC products everyfive years, that one-third of the increase in real U.S. manufacturing shipments between 1972 and 1997is due to the net adding and dropping of products by survivors, and that firms are more likely to dropproducts which are younger and have smaller production volumes relative to other firms producingthe same product. The product-switching behavior we observe is consistent with an extended model ofindustry dynamics emphasizing firm heterogeneity and self-selection into individual product markets.Our findings suggest that product switching contributes towards a reallocation of economic activitywithin firms towards more productive uses.

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Paper provided by Centre for Economic Performance, LSE in its series CEP Discussion Papers with number dp0736.

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Date of creation: Aug 2006
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Handle: RePEc:cep:cepdps:dp0736

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Related research
Keywords: Heterogeneous firms Product differentiation Product market entry and exit

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Find related papers by JEL classification:
D21 - Microeconomics - - Production and Organizations - - - Firm Behavior
E23 - Macroeconomics and Monetary Economics - - Macroeconomics: Consumption, Saving, Production, Employment, and Investment - - - Production
L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
L60 - Industrial Organization - - Industry Studies: Manufacturing - - - General

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Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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Full references

Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Andrew B. Bernard & J. Bradford Jensen & Stephen J. Redding & Peter K. Schott, 2007. "Firms in International Trade," NBER Working Papers 13054, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  2. Jozef Konings & Hylke Vandenbussche, 2007. "Antidumping Protection and Productivity of Domestic Firms: A firm level analysis," LICOS Discussion Papers 19607, LICOS - Centre for Institutions and Economic Performance, K.U.Leuven. [Downloadable!]
    Other versions:
  3. Zoltan Acs & Lawrence A. Plummer & Ryan Sutter, 2007. "Penetrating the Knowledge Filter in the Rust Belt," Jena Economic Research Papers 2007-058, Friedrich-Schiller-University Jena, Max-Planck-Institute of Economics, Thueringer Universitaets- und Landesbibliothek. [Downloadable!]
  4. Lee Branstetter & Raymond Fisman & C. Fritz Foley & Kamal Saggi, 2007. "Intellectual Property Rights, Imitation, and Foreign Direct Investment: Theory and Evidence," NBER Working Papers 13033, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  5. Andrew Sweeting, 2007. "Dynamic Product Repositioning in Differentiated Product Markets: The Case of Format Switching in the Commercial Radio Industry," NBER Working Papers 13522, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  6. Florin Bilbiie & Fabio Ghironi & Marc J. Melitz, 2007. "Endogenous Entry, Product Variety, and Business Cycles," NBER Working Papers 13646, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  7. Nicholas Bloom, 2007. "The Impact of Uncertainty Shocks," NBER Working Papers 13385, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  8. Florin O. Bilbiie & Fabio Ghironi & Marc J. Melitz, 2007. "Monetary Policy and Business Cycles with Endogenous Entry and Product Variety," NBER Working Papers 13199, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  9. Erzo G.J. Luttmer, 2008. "On the mechanics of firm growth," Working Papers 657, Federal Reserve Bank of Minneapolis. [Downloadable!]
  10. Renata Kosova & Francine Lafontaine, 2006. "Firm Survival and Growth in Retail and Service Industries: Evidence from Franchised Chains," Working Papers 0007, School of Business, The George Washington University. [Downloadable!]
  11. Andrew B. Bernard & Stephen J. Redding & Peter K. Schott, 2006. "Multi-Product Firms and Trade Liberalization," NBER Working Papers 12782, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  12. Ph. Monfort & Hylke Vandenbussche & E. Forlani, 2008. "Chinese Competition and Skill-Upgrading in European Textiles: Firm-level Evidence," LICOS Discussion Papers 19808, LICOS - Centre for Institutions and Economic Performance, K.U.Leuven. [Downloadable!]
  13. Holger Görg & Richard Kneller & Balázs Muraközy, 2008. "What makes a successful export?," Kiel Working Papers 1399, Kiel Institute for the World Economy. [Downloadable!]
    Other versions:
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