Multi-Product Firms and Product Switching
August 2008
Working Paper Number:
CES-08-24
Abstract
This paper examines the frequency, pervasiveness and determinants of product switching by U.S. 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 towards their most efficient use.
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production,
manufacturing,
sale,
product,
merger,
industry productivity,
monopolistic,
innovation
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