Multiple-Product Firms and Product Switching
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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)
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Production-function residuals capture not only technical efficiency differences but also market power, factor market distortions, or product mix changes.
“These residuals capture not only differences in technical efficiency across firms but also differences in market power, factor market distortions, or changes in the product mix, as suggested by the recent work by Lucia Foster, John Haltiwanger, and Chad Syverson (2008), Chang-Tai Hsieh and Peter Klenow (2009), and Bernard, Stephen Redding, and Peter Schott (2010), respectively.”
From Trade Liberalization, Exports, and Technology Upgrading: Evidence on the Impact of MERCOSUR on Argentinian Firms (2011) · cites this paper as Bernard, Stephen Redding, and Peter Schott (2010)
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Bustos, P. (2011) · American Economic Review · doi:10.1257/aer.101.1.304 · Cited by 1,552 · see citing works
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Cited by
Sorted by citations
Bustos, P. (2011) · American Economic Review · doi:10.1257/aer.101.1.304 · Cited by 1,552 · see citing works
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- Authors
- Bernard, A. B., Redding, S. J., & Schott, P. K.
- Affiliations
- Dartmouth College (US)
- London School of Economics and Political Science (GB)
- Yale University (US)
- Venue
- American Economic Review
- Publisher
- American Economic Association
- Published
- 2010-03-01
- Volume
- 100
- Issue
- 1
- Pages
- 70-97
- ISSN
- 0002-8282 (ISSN-L)
- OpenAlex
- W2024421861
- Cited by
- 904
- References
- 1
- Citations by year
- 2026: 36 · 2025: 47 · 2024: 55 · 2023: 53 · 2022: 39 · 2021: 52 · 2020: 54 · 2019: 43 · 2018: 60 · 2017: 49 · 2016: 52 · 2015: 50 · 2014: 67 · 2013: 51 · 2012: 72
- FWCI
- 162.25
- Type
- journal article
- Language
- en
- Open access
- bronze
- doi.org
- Locations
- American Economic Review (publishedVersion)
- London School of Economics and Political Science Research Online (London School of Economics and Political Science) (submittedVersion)
- London School of Economics and Political Science Theses Online (London School of Economics and Political Science) (submittedVersion)
- RePEc: Research Papers in Economics (submittedVersion)
- Funders
- National Science Foundation
- Princeton University
- Leverhulme Trust
- Economic and Social Research Council (ES/H02123X/1)
- Topics
- Social Sciences › Economics, Econometrics and Finance › Economics and Econometrics › Firm Innovation and Growth
- Social Sciences › Economics, Econometrics and Finance › Economics and Econometrics › Merger and Competition Analysis
- Social Sciences › Business, Management and Accounting › Strategy and Management › Innovation and Knowledge Management
- Keywords
- product switching, product mix, product selection, industrial dynamics, firm scope, resource reallocation, manufacturing companies
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