Does product complexity matter for firms' output volatility?

Daniela Maggioni, Alessia Lo Turco and Mauro Gallegati

Journal of Development Economics, 2016, vol. 121, issue C, 94-109

Abstract: With this paper we provide the first micro-level evidence on the linkage between firm complexity and volatility. By defining product complexity à la Hausmann and Hidalgo (2009), we find that a higher complexity level of a firm's product basket is associated to a reduction of its output fluctuations. This evidence is robust to the control for omitted variables, sample selection, and to the use of alternative volatility and complexity indicators. Across similar firms, active in different sectors and regions, both technological factors and product market conditions explain the effect of complexity on volatility. However, within narrowly defined sectors and locations, the complexity–volatility nexus fully reflects the role of the human capital content of firms' product baskets.

Keywords: Output fluctuations; Technological diversification; Human capital; Product market conditions (search for similar items in EconPapers)
JEL-codes: D22 E32 F43 O12 (search for similar items in EconPapers)
Date: 2016
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Citations: View citations in EconPapers (27)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:deveco:v:121:y:2016:i:c:p:94-109

DOI: 10.1016/j.jdeveco.2016.03.006

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