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“The Dynamics of Firms’ Product Portfolio in Response to Low-Cost Country Competition : An Empirical Assessment”

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  • Claire LELARGE, Benjamin Nefussi

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    Abstract

    We rely on a new dataset containing detailed information about firm level productiondecomposition and innovation activities in order to investigate whether the observed aggregatereallocation of French production may be driven (at least partly) by firm level product portfoliostrategies, in particular when firms experience a high competitive pressure arising from low-costcountries. Using an instrumental variable strategy, we obtain that firms experiencing a high lowcostcountry competitive pressure are significantly more diversified in their productions, and areinvolved in (either) more frequent or higher reallocation of their product portfolios towardsproducts they were not previously producing. Further analysis shows that more productive firmsonly are able to introduce true product innovations, which may explain why they achieve highersurvival rates.

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    Bibliographic Info

    Paper provided by Centre de Recherche en Economie et Statistique in its series Working Papers with number 2008-27.

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    Length: 41
    Date of creation: 2008
    Date of revision:
    Handle: RePEc:crs:wpaper:2008-27

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    1. Peter Neary & Carsten Eckel, 2006. "Multi-Product Firms and Flexible Manufacturing in the Global Economy," Economics Series Working Papers 292, University of Oxford, Department of Economics.
    2. Lionel Fontagné & Guillaume Gaulier & Soledad Zignago, 2007. "Specialisation across Varieties within Products and North-South Competition," Working Papers 2007-06, CEPII research center.
    3. Hallak, Juan Carlos, 2006. "Product quality and the direction of trade," Journal of International Economics, Elsevier, vol. 68(1), pages 238-265, January.
    4. Andrew B. Bernard & J. Bradford Jensen & Peter K. Schott, 2003. "Survival of the best fit: exposure to low-wage countries and the (uneven) growth of U.S. manufacturing plants," LSE Research Online Documents on Economics 20028, London School of Economics and Political Science, LSE Library.
    5. Rivers, Douglas & Vuong, Quang H., 1988. "Limited information estimators and exogeneity tests for simultaneous probit models," Journal of Econometrics, Elsevier, vol. 39(3), pages 347-366, November.
    6. Mayer, Thierry & Zignago, Soledad, 2006. "Notes on CEPII’s distances measures," MPRA Paper 26469, University Library of Munich, Germany.
    7. Jeffrey M Wooldridge, 2010. "Econometric Analysis of Cross Section and Panel Data," MIT Press Books, The MIT Press, edition 2, volume 1, number 0262232588, December.
    8. Mathias Thoenig & Thierry Verdier, 2003. "A Theory of Defensive Skill-Biased Innovation and Globalization," American Economic Review, American Economic Association, vol. 93(3), pages 709-728, June.
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