CREAT: Census Research Exploration and Analysis Tool

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, sale, manufacturing, products industries, product, merger, industry productivity, monopolistic, innovation

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:
National Science Foundation, Standard Industrial Classification, American Economic Association, Center for Economic Studies, Ordinary Least Squares, Total Factor Productivity, Company Organization Survey, Princeton University, Census of Manufacturing Firms, Journal of Economic Literature

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