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Product Diversification and Profitability in German Manufacturing Firms

Author

Listed:
  • 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)

Abstract

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.

Suggested Citation

  • Braakmann Nils & Wagner Joachim, 2011. "Product Diversification and Profitability in German Manufacturing Firms," Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik), De Gruyter, vol. 231(3), pages 326-335, June.
  • Handle: RePEc:jns:jbstat:v:231:y:2011:i:3:p:326-335
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    References listed on IDEAS

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    1. Bernd Görzig & Martin Gornig & Axel Werwatz, 2007. "Produktvielfalt und Produktivität der IKT-Produzenten:Eine Analyse unter Nutzung verbundener amtlicher Unternehmensdaten," AStA Wirtschafts- und Sozialstatistisches Archiv, Springer;Deutsche Statistische Gesellschaft - German Statistical Society, vol. 1(2), pages 145-161, October.
    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. Alexander Vogel & Joachim Wagner, 2016. "Exports and Profitability — First Evidence for German Business Services Enterprises," World Scientific Book Chapters,in: Microeconometrics of International Trade, chapter 8, pages 279-310 World Scientific Publishing Co. Pte. Ltd..
    4. Hirsch, Seev & Lev, Baruch, 1971. "Sales Stabilization Through Export Diversification," The Review of Economics and Statistics, MIT Press, pages 270-277.
    5. 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.
    6. Petra Zloczysti & Cathleen Faber, 2007. "Diversifikationsmaße im Praxistest: Ergebnisse auf der Grundlage von amtlichen Mikrodaten für Deutschland," Vierteljahrshefte zur Wirtschaftsforschung / Quarterly Journal of Economic Research, DIW Berlin, German Institute for Economic Research, vol. 76(3), pages 29-42.
    7. 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.
    8. Michael Fritsch & Bernd Görzig & Ottmar Hennchen & Andreas Stephan, 2004. "European Data Watch: Cost Structure Surveys for Germany," Schmollers Jahrbuch : Journal of Applied Social Science Studies / Zeitschrift für Wirtschafts- und Sozialwissenschaften, Duncker & Humblot, Berlin, vol. 124(4), pages 557-566.
    9. Cynthia A. Montgomery, 1994. "Corporate Diversificaton," Journal of Economic Perspectives, American Economic Association, pages 163-178.
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    Cited by:

    1. repec:eee:touman:v:59:y:2017:i:c:p:363-375 is not listed on IDEAS
    2. Joachim Wagner & John Philipp Weche Gelübcke, 2012. "Foreign Ownership and Firm Survival: First Evidence for Enterprises in Germany," International Economics, CEPII research center, issue 132, pages 117-139.
    3. Joachim Wagner, 2014. "Is export diversification good for profitability? First evidence for manufacturing enterprises in Germany," Applied Economics, Taylor & Francis Journals, vol. 46(33), pages 4083-4090, November.
    4. Joachim Wagner, 2013. "Exports, imports and firm survival: first evidence for manufacturing enterprises in Germany," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), pages 113-130.
    5. Joachim Wagner, 2013. "Exports, imports and firm survival: first evidence for manufacturing enterprises in Germany," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), pages 113-130.

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    Keywords

    Product diversification; profitability; Germany;

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