Escaping Cannibalization: Evidence from China's Multi-Product Hybrid Firms

Abstract

This study analyzes hybrid trade behavior among China’s multi-product export firms, which enables them to mitigate cannibalization through internal product reallocation. Theoretical and empirical findings reveal that: 1) Switching from ordinary or processing trade to hybrid trade leads to a dual increase in product range and market share, thus alleviating cannibalization; 2) Foreign firms, private firms, and firms in technology-intensive industries experience the greatest alleviation of cannibalization when switching to hybrid trade; 3) The reallocation of products and export relationships is a crucial mechanism for hybrid trade firms to escape cannibalization.

Keywords: multi-product firm, trade regime switching, hybrid trade, cannibalization