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Product Differentiation and Profitability in German Manufacturing Firms

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  • Nils Braakmann

    ()
    (Institute of Economics, University of Lüneburg)

  • Joachim Wagner

    ()
    (Institute of Economics, University of Lüneburg)

Abstract

We use a unique rich newly built data set for German manufacturing enterprises to investigate the product differentiation – firm performance relationship. We find that an increase in the degree of product diversification has a negative impact on profitability when observed and unobserved firm characteristics are controlled for. The effects are statistically significant and large from an economic point of view. This helps to understand the – at least, at a first glance – surprising fact that nearly 40 percent of all manufacturing enterprises with at least 20 employees in Germany are singleproduct firms according to a detailed classification of products, and that multi-product enterprises with a large number of goods are a rare species.

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Bibliographic Info

Paper provided by University of Lüneburg, Institute of Economics in its series Working Paper Series in Economics with number 115.

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Length: 28 pages
Date of creation: Jan 2009
Date of revision:
Handle: RePEc:lue:wpaper:115

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Keywords: Product differentiation; profitability. Germany;

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  1. Ernest H. Hall Jr., 1995. "Corporate Diversification and Perfor Mance: An Investigation of Causality," Australian Journal of Management, Australian School of Business, vol. 20(1), pages 25-42, June.
  2. Martin Gornig & Bernd Görzig, 2007. "Verstärkte Spezialisierung deutscher Unternehmen," DIW Wochenbericht, DIW Berlin, German Institute for Economic Research, vol. 74(20), pages 333-335.
  3. Bernd Görzig & Martin Gornig & Ramona Pohl, 2007. "Spezialisierung und Unternehmenserfolg im verarbeitenden Gewerbe Deutschlands," Vierteljahrshefte zur Wirtschaftsforschung / Quarterly Journal of Economic Research, DIW Berlin, German Institute for Economic Research, vol. 76(3), pages 43-58.
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Cited by:
  1. Nils Braakmann & Joachim Wagner, 2011. "Product diversification and stability of employment and sales: first evidence from German manufacturing firms," Applied Economics, Taylor & Francis Journals, vol. 43(27), pages 3977-3985.
  2. Joachim Wagner, 2008. "Produktdifferenzierung in deutschen Industrieunternehmen 1995 – 2004: Ausmaß und Bestimmungsgründe," Working Paper Series in Economics 99, University of Lüneburg, Institute of Economics.

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