Changes in the Diversification of Canadian Manufacturing Firms (1973-1997): A Move to Specialization

Abstract

This paper studies changes in diversification of firms and plants since the early 1970s in the Canadian manufacturing sector. It finds that there has been a general increase in specialization of both firms and plants. Firms have been continuously reducing the span of industries in which they operate, particularly when the industries are unrelated. Commodity specialization has also occurred at the plant level; however, in contrast to industry specialization, the pace of commodity specialization emerged late in the period, around the time of implementation of the Free Trade Agreement between Canada and the United States. Plant specialization increased most in those plants that moved most strongly into export markets.

Keywords: Keywords: diversification, trade