Journal
AMERICAN ECONOMIC REVIEW
Volume 100, Issue 1, Pages 70-97Publisher
AMER ECONOMIC ASSOC
DOI: 10.1257/aer.100.1.70
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Funding
- Economic and Social Research Council [ES/H02123X/1] Funding Source: researchfish
- ESRC [ES/H02123X/1] Funding Source: UKRI
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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.
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