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Swimming upstream: input-output linkages and thedirection of product adoption

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  • Boehm, Johannes
  • Dhingra, Swati
  • Morrow, John

Abstract

Multiproduct firms dominate production, and their product turnover contributes substantially to aggregate growth. Firms continually adapt their product mix, but what determines which products firms expand into? Theories of the firm propose that mulitproduct firms choose to make products which need the same know-how or inputs that can't be bought ‘off the shelf’. We empirically examine this rationale by testing for firm-level capabilities that are shared across products and manifested through input-output (IO) linkages. We show that a firm's idiosyncratic horizontal and vertical similarity to a product's IO structure predicts product adoption. Using product-specific policy changes for a firm's inputs and outputs, we show that input linkages are the most important, suggesting that firms' product capabilities depend more on economies of scope rather than product market complementarities.

Suggested Citation

  • Boehm, Johannes & Dhingra, Swati & Morrow, John, 2016. "Swimming upstream: input-output linkages and thedirection of product adoption," LSE Research Online Documents on Economics 66418, London School of Economics and Political Science, LSE Library.
  • Handle: RePEc:ehl:lserod:66418
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    File URL: http://eprints.lse.ac.uk/66418/
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    References listed on IDEAS

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    Cited by:

    1. Vandenbussche, Hylke & Viegelahn, Christian, 2016. "Input Reallocation Within Firms," CEPR Discussion Papers 11395, C.E.P.R. Discussion Papers.

    More about this item

    Keywords

    Multiproduct firms; product adoption; vertical linkages; horizontal linkages;

    JEL classification:

    • J1 - Labor and Demographic Economics - - Demographic Economics
    • N0 - Economic History - - General

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