SWIMMING UPSTREAM: Input-Output Linkages and the Direction of Product Adoption

14  April 2016    4:00 pm

Johannes Boehm, SciencesPo Paris


wiiw, Rahlgasse 3, 1060 Vienna, library (2nd floor)


Johannes Boehm

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 multiproduct 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

JEL classification: L1, L2, M2, O3