Multiple-product firms and product switching

Andrew B. Bernard, Stephen J. Redding, Peter K. Schott

Research output: Contribution to journalArticlepeer-review

415 Scopus citations

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.

Original languageEnglish (US)
Pages (from-to)70-97
Number of pages28
JournalAmerican Economic Review
Volume100
Issue number1
DOIs
StatePublished - Mar 2010
Externally publishedYes

All Science Journal Classification (ASJC) codes

  • Economics and Econometrics

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