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Firms in product space: Adoption, growth and competition

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  • Luca Macedoni
  • John Morrow
  • Vladimir Tyazhelnikov

Abstract

Which products are potentially produced together? When demand for a product increases, which firms will supply it? Using multi-product production patterns within and across firms, we recover a continuous cost based distance between firms and unproduced products. Higher product distance implies decreasing adoption frequency. When export demand induces domestic product adoption, closer firms provide this supply. Potential costs imply measures of Revenue and Competition Potential. These predict firm sales growth, scope growth and core focus. If all firms produced all products linked by co-production, consumer welfare would increase by 10-30%.

Suggested Citation

  • Luca Macedoni & John Morrow & Vladimir Tyazhelnikov, 2024. "Firms in product space: Adoption, growth and competition," CEP Discussion Papers dp1978, Centre for Economic Performance, LSE.
    • Handle: RePEc:cep:cepdps:dp1978
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    References listed on IDEAS

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    Cited by:

    1. Herkenhoff, Philipp & Krautheim, Sebastian & Sauré, Philip, 2024. "A simple model of buyer–seller networks in international trade," European Economic Review, Elsevier, vol. 170(C).

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    More about this item

    Keywords

    multi-product firms; firm capabilities; product classification; product space; growth paths;
    All these keywords.

    JEL classification:

    • F1 - International Economics - - Trade
    • D2 - Microeconomics - - Production and Organizations
    • L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance
    • L23 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Organization of Production
    • L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance

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