The Superstar and the Followers: Intra-Firm Product Complementarity in International Trade

Björn Arnarson

No 2016:25, Working Papers from Lund University, Department of Economics

Abstract: This paper investigates whether firms’ exports of different products within a market are systematically interconnected. Using high-quality Swedish firm-registry data from 1997-2011, I first document that the distribution of firm export sales is skewed towards their best performing products (‘superstars’). I then use a novel instrumental variable approach to identify if the ‘superstar’ products induce more trade of non-superstar products. I find evidence that the exports of low-ranked (non-star) products of a firm are contingent on the exports of a single superstar product to each destination. Extending the ‘superstar’ concept to a ‘superstar core’ of products strengthens this result. Hence, I find that the exports of non-star products complements the superstar(s) while conversely, the same complementarity is not found using low-ranked products as placebo-superstars. The main contributions of this paper is identifying a new, sizeable and systematic intra-firm-destination one-way demand driven complementarity between products that can explain export sales variation within a market. Ignoring this pattern of between product dependency may lead to an over-emphasis on product scope as products should not be viewed in isolation.

Keywords: Multi-product firms; product complementarity; intra-firm product dependence; within-destination export variation; Product Demand (search for similar items in EconPapers)
JEL-codes: F10 F13 F14 L10 L20 (search for similar items in EconPapers)
Pages: 40 pages
Date: 2016-10-11, Revised 2017-09-22
New Economics Papers: this item is included in nep-ind and nep-int
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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Related works:
Journal Article: The superstar and the followers: Intra-firm product complementarity in international trade (2020)
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Persistent link: https://EconPapers.repec.org/RePEc:hhs:lunewp:2016_025

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