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

Author

Listed:
  • 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: https://researchonline.lse.ac.uk/id/eprint/66418/
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    Cited by:

    1. Johannes Boehm & Swati Dhingra & John Morrow, 2022. "The Comparative Advantage of Firms," Journal of Political Economy, University of Chicago Press, vol. 130(12), pages 3025-3100.
    2. José Liberti & Jason Sturgess & Andrew Sutherland, 2018. "Economics of Voluntary Information Sharing," Working Papers 869, Queen Mary University of London, School of Economics and Finance.
    3. Kerstin Hötte, 2021. "Skill transferability and the stability of transition pathways- A learning-based explanation for patterns of diffusion," Journal of Evolutionary Economics, Springer, vol. 31(3), pages 959-993, July.
    4. Daniel Goya, 2019. "Chinese competition and network effects on the extensive margin," Working Papers 2019-01, Escuela de Negocios y Economía, Pontificia Universidad Católica de Valparaíso.
    5. Michael Irlacher, 2022. "Multi-product Firms in International Economics," Economics working papers 2022-01, Department of Economics, Johannes Kepler University Linz, Austria.
    6. Hylke Vandenbussche & Christian Viegelahn, 2016. "Input reallocation within firms," Working Papers of Department of Economics, Leuven 553943, KU Leuven, Faculty of Economics and Business (FEB), Department of Economics, Leuven.
    7. Goya, Daniel, 2021. "The network effect of Chinese competition on what domestic suppliers produce," Economic Modelling, Elsevier, vol. 102(C).

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    Keywords

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    JEL classification:

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

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