Multi-Product Firms and Product Switching

48 Pages Posted: 17 May 2006

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: May 2006

Abstract

This paper examines the frequency, pervasiveness and determinants of product switching among U.S. manufacturing firms. We find that two-thirds of firms alter their mix of five-digit SIC products every five years, that one-third of the increase in real U.S. manufacturing shipments between 1972 and 1997 is due to the net adding and dropping of products by survivors, and that firms are more likely to drop products which are younger and have smaller production volumes relative to other firms producing the same product. The product-switching behavior we observe is consistent with an extended model of industry dynamics emphasizing firm heterogeneity and self-selection into individual product markets. Our findings suggest that product switching contributes towards a reallocation of economic activity within firms towards more productive uses.

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 (May 2006). Tuck School of Business Working Paper No. 2006-35, Available at SSRN: https://ssrn.com/abstract=902600 or http://dx.doi.org/10.2139/ssrn.902600

Andrew B. Bernard (Contact Author)

Dartmouth College - Tuck School of Business ( email )

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National Bureau of Economic Research (NBER)

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Stephen J. Redding

Princeton University ( email )

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

Peter K. Schott

Yale University - School of Management ( email )

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

National Bureau of Economic Research (NBER)

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Yale University - Cowles Foundation

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United States

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