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Multiple-Product Firms and Product Switching

Multiple-Product Firms and Product Switching 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 ) http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png American Economic Review American Economic Association

Multiple-Product Firms and Product Switching

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References (97)

Publisher
American Economic Association
Copyright
Copyright © 2010 by the American Economic Association
Subject
Articles
ISSN
0002-8282
DOI
10.1257/aer.100.1.70
Publisher site
See Article on Publisher Site

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 )

Journal

American Economic ReviewAmerican Economic Association

Published: Mar 1, 2010

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