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Renewal of Companies Through Product Switching

Author

Listed:
  • Kuosmanen, Natalia
  • Valmari, Nelli
Abstract
The past few decades have witnessed a slowdown in productivity growth in many advanced economies, including Finland. Against this backdrop, this study investigates product switching in Finnish manufacturing firms during the period of 2009–2019. The findings indicate a growing trend towards specialization, with more firms focusing on a single product. In general, product diversity has decreased over time. Multi-product firms and those with diverse output tend to be larger in terms of value added, sales, and employment. Additionally, these firms are also more likely to export their products compared to single-product firms. While single-product firms outperform multi-product firms in productivity, the study shows that product diversity is positively related to productivity. Furthermore, the study demonstrates that there is a positive relationship between product scope expansion and contraction and an increase in firm size, as compared to firms where product scopes remain unchanged. These findings suggest that product switching is closely related to the economic outcomes of Finnish manufacturing firms.

Suggested Citation

  • Kuosmanen, Natalia & Valmari, Nelli, 2023. "Renewal of Companies Through Product Switching," ETLA Working Papers 104, The Research Institute of the Finnish Economy.
    • Handle: RePEc:rif:wpaper:104
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    References listed on IDEAS

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    More about this item

    Keywords

    Manufacturing firms; Multi-product firms; Product switching;
    All these keywords.

    JEL classification:

    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance
    • O14 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Industrialization; Manufacturing and Service Industries; Choice of Technology

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