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Product Diversification and Profitability in German Manufacturing Firms

Listed author(s):
  • 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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  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, 2010. "Exports and Profitability - First Evidence for German Business Services Enterprises," Applied Economics Quarterly (formerly: Konjunkturpolitik), Duncker & Humblot, Berlin, vol. 56(1), pages 7-30.
  4. Hirsch, Seev & Lev, Baruch, 1971. "Sales Stabilization Through Export Diversification," The Review of Economics and Statistics, MIT Press, vol. 53(3), pages 270-277, August.
  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, vol. 8(3), pages 163-178, Summer.
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