Swimming upstream: input-output linkages and the direction of product adoption

Johannes Boehm, Swati Dhingra and John Morrow

CEP Discussion Papers from Centre for Economic Performance, LSE

Abstract: Multiproduct firms dominate production, and their product turnover contributes substantially to aggregate growth. Firms continually adapt their product mix, but what determines which products firms expand into? Theories of the firm propose that mulitproduct firms choose to make products which need the same know-how or inputs that can't be bought 'off the shelf'. We empirically examine this rationale by testing for firm-level capabilities that are shared across products and manifested through input-output (IO) linkages. We show that a firm's idiosyncratic horizontal and vertical similarity to a product's IO structure predicts product adoption. Using product-specific policy changes for a firm's inputs and outputs, we show that input linkages are the most important, suggesting that firms' product capabilities depend more on economies of scope rather than product market complementarities.

Keywords: Multiproduct firms; product adoption; vertical linkages; horizontal linkages (search for similar items in EconPapers)
JEL-codes: L1 L2 M2 O3 (search for similar items in EconPapers)
Date: 2016-02-22
New Economics Papers: this item is included in nep-bec and nep-tid
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Citations: View citations in EconPapers (9)

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Working Paper: Swimming upstream: input-output linkages and thedirection of product adoption (2016)
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Persistent link: https://EconPapers.repec.org/RePEc:cep:cepdps:dp1407

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