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

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    Submitted manuscript, 959 KB, PDF document

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.
Original languageEnglish
JournalJournal of Economic Behavior & Organization
Volume117
Pages (from-to)277-304
ISSN0167-2681
DOIs
Publication statusPublished - Sep 2020

    Research areas

  • Faculty of Social Sciences - Multi-product firms, Product complementarity, Intra-firm product dependence, Within-destination export variation, Product demand, Product synergies

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