American Economic Review
ISSN 0002-8282 (Print) | ISSN 1944-7981 (Online)
Multiple-Product Firms and Product Switching
American Economic Review
vol. 100,
no. 1, March 2010
(pp. 70–97)
Abstract
This paper examines the frequency, pervasiveness, and determinants of product switching by US 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 toward their most efficient use. (JEL L11, L21, L25, L60)Citation
Bernard, Andrew B., Stephen J. Redding, and Peter K. Schott. 2010. "Multiple-Product Firms and Product Switching." American Economic Review, 100 (1): 70–97. DOI: 10.1257/aer.100.1.70Additional Materials
JEL Classification
- L11 Production, Pricing, and Market Structure; Size Distribution of Firms
- L21 Business Objectives of the Firm
- L25 Firm Performance: Size, Diversification, and Scope
- L60 Industry Studies: Manufacturing: General