Multi-Product Firms and Product Switching

50 Pages Posted: 29 Jul 2009

See all articles by Andrew B. Bernard

Andrew B. Bernard

Dartmouth College - Tuck School of Business; National Bureau of Economic Research (NBER); Centre for Economic Policy Research (CEPR)

Stephen J. Redding

Princeton University

Peter K. Schott

Yale University - School of Management; National Bureau of Economic Research (NBER); Yale University - Cowles Foundation

Multiple version iconThere are 4 versions of this paper

Date Written: August 1, 2008

Abstract

This paper examines the frequency, pervasiveness and determinants of product switching by U.S. 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 towards their most efficient use.

Keywords: Heterogeneous firms, Product differentiation, Product market entry and exit

JEL Classification: D21, E23, L11, L60

Suggested Citation

Bernard, Andrew B. and Redding, Stephen J. and Schott, Peter K., Multi-Product Firms and Product Switching (August 1, 2008). US Census Bureau Center for Economic Studies Paper No. CES-WP- 08-24. Available at SSRN: https://ssrn.com/abstract=1440916 or http://dx.doi.org/10.2139/ssrn.1440916

Andrew B. Bernard (Contact Author)

Dartmouth College - Tuck School of Business ( email )

100 Tuck Hall
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603-646-9084 (Fax)

HOME PAGE: http://mba.tuck.dartmouth.edu/pages/faculty/Andrew.Bernard/

National Bureau of Economic Research (NBER)

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Centre for Economic Policy Research (CEPR) ( email )

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Stephen J. Redding

Princeton University ( email )

Princeton, NJ 08544-1021
United States

HOME PAGE: http://www.princeton.edu/~reddings/

Peter K. Schott

Yale University - School of Management ( email )

135 Prospect Street
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New Haven, CT 06520-8200
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203-436-4260 (Phone)
203-436-6974 (Fax)

HOME PAGE: http://www.som.yale.edu/faculty/pks4

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Yale University - Cowles Foundation

Box 208281
New Haven, CT 06520-8281
United States

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