The superstar and the followers: Intra-firm product complementarity in international trade

Björn Arnarson

Journal of Economic Behavior & Organization, 2020, vol. 177, issue C, 277-304

Abstract: Export sales of multi-product firms are known to be skewed towards their best performing core products. Less is known about the large number of products outside the core that still account for a considerable share of the export value. I use high-quality Swedish firm-registry data to investigate if the exports of core and non-core products are systematically interconnected. Using a novel instrumental variable approach, I find evidence that the exports of non-core products respond to trade of the core. Conversely, the same complementarity is not found using non-core products as placebo-cores. Decomposing the response, I find that over a quarter of the effect can be attributed to price changes of non-core products, suggestive of demand-side explanations. The main contribution of this paper is identifying a new, sizeable, and systematic within-firm one-way complementarity between products that can explain non-core product trade flows. Ignoring this pattern of cross-product dependence may lead to an under-emphasis on the core and over-emphasis on individual trade flows as products should not be viewed in isolation, since the ‘superstar’ core has (contemporaneous) followers.

Keywords: Multi-product firms; Product complementarity; Intra-firm product dependence; Within-destination export variation; Product demand; Product synergies (search for similar items in EconPapers)
JEL-codes: F10 F13 F14 L1 L2 (search for similar items in EconPapers)
Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (8)

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Working Paper: The Superstar and the Followers: Intra-Firm Product Complementarity in International Trade (2017)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jeborg:v:177:y:2020:i:c:p:277-304

DOI: 10.1016/j.jebo.2020.06.013

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