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Product Diversification and Profitability in German Manufacturing Firms

  • Braakmann Nils


    (Newcastle University Business School, Newcastle University, Ridley Building, Newcastle upon Tyne, NE1 7RU, United Kingdom)

  • Wagner Joachim


    (Leuphana University Lueneburg, Institute of Economics, P.O. Box 2440, 21314 Lueneburg, Germany)

We use unique rich data for German manufacturing enterprises to investigate the product diversification - 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 fact that nearly 40 percent of all enterprises with at least 20 employees are single-product 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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Article provided by De Gruyter in its journal Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik).

Volume (Year): 231 (2011)
Issue (Month): 3 (June)
Pages: 326-335

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Handle: RePEc:jns:jbstat:v:231:y:2011:i:3:p:326-335
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