How do Fir ms Grow? The Life Cycle of Products Matters (joint with David Arge nte and Munseob Lee)
Abstract:
We exploit detailed product- and fir m-level data to study the size of firms and products over their life cycles . We build a dataset that contains information on the product portfolio of each firm in the consumer goods sector over the period 2006–2015. We docume nt that, with the exception of the first few quarters, sales of products de cline at a steady pace throughout most of their life cycle. These dynamics are robust across very heterogenous types of products, and contrast with th e profile of firms, which grow throughout most of their life cycle. Motivat ed by these results, we create a statistical framework of firm growth as a function of the vintages of products. Using this decomposition we quantify, for young and mature firms, the importance of new product introduction (bo th the intensive and extensive margins) and the impact of decreasing sales of older vintages. We find that firms must grow by continuously adding prod ucts that generate sufficiently large revenue in order to compensate the re duction in revenue accruing from previous vintages of products. We structur ally estimate a model of heterogeneous multiproduct firms and decompose sal es over the life cycle of the product to understand the mechanisms behind t heir decline. Our results indicate that demand-side factors are behind the decline in sales of products and are consistent with preferences for newer vintages of products.
DTSTAMP:20260406T002702Z DTSTART:20180524T163000Z DTEND:20180524T180000Z SEQUENCE:0 TRANSP:OPAQUE END:VEVENT END:VCALENDAR