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The Dynamics of Firms’ Product Portfolio in Response to Low-Cost Country Competition : An Empirical Assessment


  • Claire LELARGE, Benjamin Nefussi



We rely on a new dataset containing detailed information about firm level productiondecomposition and innovation activities in order to investigate whether the observed aggregatereallocation of French production may be driven (at least partly) by firm level product portfoliostrategies, in particular when firms experience a high competitive pressure arising from low-costcountries. Using an instrumental variable strategy, we obtain that firms experiencing a high lowcostcountry competitive pressure are significantly more diversified in their productions, and areinvolved in (either) more frequent or higher reallocation of their product portfolios towardsproducts they were not previously producing. Further analysis shows that more productive firmsonly are able to introduce true product innovations, which may explain why they achieve highersurvival rates.

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  • Claire LELARGE, Benjamin Nefussi, 2008. "The Dynamics of Firms’ Product Portfolio in Response to Low-Cost Country Competition : An Empirical Assessment," Working Papers 2008-27, Center for Research in Economics and Statistics.
  • Handle: RePEc:crs:wpaper:2008-27

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    References listed on IDEAS

    1. Nicholas Bloom & Mirko Draca & John Van Reenen, 2016. "Trade Induced Technical Change? The Impact of Chinese Imports on Innovation, IT and Productivity," Review of Economic Studies, Oxford University Press, vol. 83(1), pages 87-117.
    2. Lionel Fontagné & Guillaume Gaulier & Soledad Zignago, 2008. "Specialization across varieties and North-South competition," Economic Policy, CEPR;CES;MSH, vol. 23, pages 51-91, January.
    3. Bernard, Andrew B. & Jensen, J. Bradford & Schott, Peter K., 2006. "Survival of the best fit: Exposure to low-wage countries and the (uneven) growth of U.S. manufacturing plants," Journal of International Economics, Elsevier, vol. 68(1), pages 219-237, January.
    4. Jeffrey M Wooldridge, 2010. "Econometric Analysis of Cross Section and Panel Data," MIT Press Books, The MIT Press, edition 2, volume 1, number 0262232588, January.
    5. Carsten Eckel & J. Peter Neary, 2010. "Multi-Product Firms and Flexible Manufacturing in the Global Economy," Review of Economic Studies, Oxford University Press, vol. 77(1), pages 188-217.
    6. Mayer, Thierry & Zignago, Soledad, 2006. "Notes on CEPII’s distances measures," MPRA Paper 26469, University Library of Munich, Germany.
    7. Hallak, Juan Carlos, 2006. "Product quality and the direction of trade," Journal of International Economics, Elsevier, vol. 68(1), pages 238-265, January.
    8. Rivers, Douglas & Vuong, Quang H., 1988. "Limited information estimators and exogeneity tests for simultaneous probit models," Journal of Econometrics, Elsevier, vol. 39(3), pages 347-366, November.
    9. Mathias Thoenig & Thierry Verdier, 2003. "A Theory of Defensive Skill-Biased Innovation and Globalization," American Economic Review, American Economic Association, vol. 93(3), pages 709-728, June.
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