Renewal of Companies Through Product Switching

The past few decades have witnessed a slowdown in productivity growth in many advanced economies, including Finland. Against this backdrop, this study investigates product switching in Finnish manufacturing firms during the period of 2009–2019. The findings indicate a growing trend towards specialization, with more firms focusing on a single product. In general, product diversity has decreased over time. Multi-product firms and those with diverse output tend to be larger in terms of value added, sales, and employment. Additionally, these firms are also more likely to export their products compared to single-product firms. While single-product firms outperform multi-product firms in productivity, the study shows that product diversity is positively related to productivity. Furthermore, the study demonstrates that there is a positive relationship between product scope expansion and contraction and an increase in firm size, as compared to firms where product scopes remain unchanged. These findings suggest that product switching is closely related to the economic outcomes of Finnish manufacturing firms.