Product Scope Adjustment to the China Shock: Competition at Home and Abroad

Jaerim Choi (), Seongin Hong, Jung Hur and Manho Kang
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Seongin Hong: University of Virginia
Jung Hur: Sogang University
Manho Kang: Georgia Institute of Technology

No 2026rwp-288, Working papers from Yonsei University, Yonsei Economics Research Institute

Abstract: How does China's rise affect exporters’ product scope when they compete with Chinese firms at home and abroad? Using Korean plant-level data, we find that both domestic import penetration and export competition in third markets reduce product scope. Specifically, export competition dampens new product creation, while import penetration accelerates the destruction of existing products. Eventually, both forms of competition lead to resource reallocation toward core products, highlighting distinct mechanisms through which global competition shapes product dynamics. We propose the disproportionate importance of the domestic market, the forward-looking nature of product creation, and creative destruction as potential drivers behind these responses.

Keywords: Creative Destruction; Export Competition; Import Penetration; Multi-Product Exporters; Product Churning; Product Scope (search for similar items in EconPapers)
JEL-codes: D22 F14 F61 L10 L25 (search for similar items in EconPapers)
Pages: 57pages
Date: 2026-05
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