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Multiple-product firms and product switching

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  • Bernard, Andrew B.
  • Redding, Stephen
  • Schott, Peter K.

Abstract

This paper examines the frequency, pervasiveness, and determinants of product switching by US manufacturing firms. We find that one-half of firms alter their mix of five-digit SIC products every five years, that product switching is correlated with both firm- and firm-product attributes, and that product adding and dropping induce large changes in firm scope. The behavior we observe is consistent with a natural generalization of existing theories of industry dynamics that incorporates endogenous product selection within firms. Our findings suggest that product switching contributes to a reallocation of resources within firms toward their most efficient use

Suggested Citation

  • Bernard, Andrew B. & Redding, Stephen & Schott, Peter K., 2010. "Multiple-product firms and product switching," LSE Research Online Documents on Economics 27861, London School of Economics and Political Science, LSE Library.
    • Handle: RePEc:ehl:lserod:27861
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    More about this item

    Keywords

    ISI; manufacturing plants; market structure; dynamics; industry; reallocation; exit; selection; turnover; growth; output;
    All these keywords.

    JEL classification:

    • L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance
    • L60 - Industrial Organization - - Industry Studies: Manufacturing - - - General
    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • L21 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Business Objectives of the Firm

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