Product Switching and Firm Performance in Japan

Author Name KAWAKAMI Atsushi  (Gakushuin University Research Institute for Economics and Management / Research Assistant, RIETI) /MIYAGAWA Tsutomu  (Gakushuin University / Faculty Fellow, RIETI)
Creation Date/NO. September 2010 10-E-043
Research Project Productivity of Industries and Firms and Japanese Economic Growth
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Following Bernard, Redding and Schott (2010), we have constructed product and firm level data on Japanese manufacturing firms using the Census of Manufactures. Employing this data, we have found that multiple-product firms show better performance than single-product firms and product switching behavior in incumbent firms leads to greater output growth in the Japanese manufacturing sector, more so than in entry and exit. Empirical studies at industry level show that an unregulated, competitive environment stimulates product switching. At firm level, labor productivity growth and an unregulated, competitive environment encourage product switching behavior. Such product switching behavior improves firm performance in the areas of output, employment and labor productivity, etc.