Input Capabilities and Product Adoption

Swati Dhingra, John Morrow and Johannes Boehm

No 963, 2015 Meeting Papers from Society for Economic Dynamics

Abstract: Multi-product firms dominate production and exporting, and product turnover contributes substantially to aggregate growth. This paper examines the sources of core competencies in product adoption for Indian manufacturing establishments. We show that firms are twice as likely to add products in their Top 5 upstream and downstream sectors. Similarity to a sector's input (but not output) structure predicts product adoption, controlling for average adoption rates of all products of the firm's sector. These results show that vertical linkages drive product adoption and that within sectors, firms' product capabilities depend on economies of scope rather than product market complementarities. Unlike single product firms, multi-product firms can internalize product adoption to focus on products that have upstream or downstream linkages to existing products.

Date: 2015
New Economics Papers: this item is included in nep-tid
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