Multi-Product Firms and Product Switching

50 Pages Posted: 9 Aug 2006

See all articles by Stephen J. Redding

Stephen J. Redding

Princeton University

Andrew B. Bernard

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

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: June 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 behaviour 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

Redding, Stephen J. and Bernard, Andrew B. and Schott, Peter K., Multi-Product Firms and Product Switching (June 2006). CEPR Discussion Paper No. 5708. Available at SSRN: https://ssrn.com/abstract=923453

Stephen J. Redding (Contact Author)

Princeton University ( email )

Princeton, NJ 08544-1021
United States

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

Andrew B. Bernard

Dartmouth College - Tuck School of Business ( email )

100 Tuck Hall
Hanover, NH 03755
United States
603-646-0302 (Phone)
603-646-9084 (Fax)

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

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

Peter K. Schott

Yale University - School of Management ( email )

135 Prospect Street
P.O. Box 208200
New Haven, CT 06520-8200
United States
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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