IDEAS home Printed from https://ideas.repec.org/a/bla/chinae/v32y2024i1p167-196.html
   My bibliography  Save this article

Industrial Policy, Product Switching, and Export Performance

Author

Listed:
  • Jiemiao Dong
  • Zhuangxiong Yu
  • Xunpeng Shi
  • Yang Yang

Abstract

Industrial policy can promote economic growth and industrial upgrading by encouraging enterprises to adopt product switching. By utilizing comprehensive industrial policies and customs trade databases from 2000 to 2015, this paper found that firms with product ranges within policy‐supported areas were more active in product switching. Among all the enterprises that adopted the product switching, those with nonmain products in policy‐supported areas were more inclined to adjust their main product. They tended to transform nonmain product to main product as opposed to introducing new main product in order to effectively leverage their export experience and established technology. Whereas, for enterprises whose main product was within the policy‐supported areas, their tendency to switch products significantly decreased. Mechanism analysis suggested that policy support, by alleviating industry distress and mitigating excessive market competition, encouraged firms to switch products to areas with policy backing. Moreover, we estimated trade performance after product switching from the perspective of product unit price and export product quality. We found that for firms whose main product was in policy‐supported areas, such switching was more likely to result in “low price, high quality” exports, whereas for firms with nonmain products in supported areas, such switching was more likely to lead to “high price, low quality” exports, which indicates that firms switching to policy‐supported areas need to continuously develop their core competencies and operate effectively to improve their production performance.

Suggested Citation

  • Jiemiao Dong & Zhuangxiong Yu & Xunpeng Shi & Yang Yang, 2024. "Industrial Policy, Product Switching, and Export Performance," China & World Economy, Institute of World Economics and Politics, Chinese Academy of Social Sciences, vol. 32(1), pages 167-196, January.
    • Handle: RePEc:bla:chinae:v:32:y:2024:i:1:p:167-196
    DOI: 10.1111/cwe.12519
    as

    Download full text from publisher

    File URL: https://doi.org/10.1111/cwe.12519
    Download Restriction: no
    File URL: https://libkey.io/10.1111/cwe.12519?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Thierry Mayer & Marc J. Melitz & Gianmarco I. P. Ottaviano, 2021. "Market Size, Competition, and the Product Mix of Exporters," World Scientific Book Chapters, in: Firms and Workers in a Globalized World Larger Markets, Tougher Competition, chapter 5, pages 109-150, World Scientific Publishing Co. Pte. Ltd..
    2. Eckel, Carsten & Iacovone, Leonardo & Javorcik, Beata & Neary, J. Peter, 2015. "Multi-product firms at home and away: Cost- versus quality-based competence," Journal of International Economics, Elsevier, vol. 95(2), pages 216-232.
    3. Loren Brandt & Johannes Van Biesebroeck & Luhang Wang & Yifan Zhang, 2017. "WTO Accession and Performance of Chinese Manufacturing Firms," American Economic Review, American Economic Association, vol. 107(9), pages 2784-2820, September.
    4. Ricardo Hausmann & Bailey Klinger, 2007. "The Structure of the Product Space and the Evolution of Comparative Advantage," Growth Lab Working Papers 10, Harvard's Growth Lab.
    5. Blalock, Garrick & Gertler, Paul J., 2008. "Welfare gains from Foreign Direct Investment through technology transfer to local suppliers," Journal of International Economics, Elsevier, vol. 74(2), pages 402-421, March.
    6. Andrew B. Bernard & Stephen J. Redding & Peter K. Schott, 2010. "Multiple-Product Firms and Product Switching," American Economic Review, American Economic Association, vol. 100(1), pages 70-97, March.
    7. Kirill Borusyak & Peter Hull & Xavier Jaravel, 2023. "Design-Based Identification with Formula Instruments: A Review," NBER Working Papers 31393, National Bureau of Economic Research, Inc.
    8. Sun, Liyang & Abraham, Sarah, 2021. "Estimating dynamic treatment effects in event studies with heterogeneous treatment effects," Journal of Econometrics, Elsevier, vol. 225(2), pages 175-199.
    9. Amit K. Khandelwal & Peter K. Schott & Shang-Jin Wei, 2013. "Trade Liberalization and Embedded Institutional Reform: Evidence from Chinese Exporters," American Economic Review, American Economic Association, vol. 103(6), pages 2169-2195, October.
    10. repec:hal:spmain:info:hdl:2441/6g0gsihsjmn5snc9pb0jo6hhp is not listed on IDEAS
    11. Salamon, Lester M. & Siegfried, John J., 1977. "Economic Power and Political Influence: The Impact of Industry Structure on Public Policy," American Political Science Review, Cambridge University Press, vol. 71(3), pages 1026-1043, September.
    12. Callaway, Brantly & Sant’Anna, Pedro H.C., 2021. "Difference-in-Differences with multiple time periods," Journal of Econometrics, Elsevier, vol. 225(2), pages 200-230.
    13. Bastos, Paulo, 2020. "Exposure of belt and road economies to China trade shocks," Journal of Development Economics, Elsevier, vol. 145(C).
    14. Jiemiao Dong & Yinxia Mi & Zhuangxiong Yu, 2022. "Industrial plans, export destinations and product quality," The World Economy, Wiley Blackwell, vol. 45(3), pages 812-840, March.
    15. C. A. Hidalgo & B. Klinger & A. -L. Barabasi & R. Hausmann, 2007. "The Product Space Conditions the Development of Nations," Papers 0708.2090, arXiv.org.
    16. Nathaniel Lane, 2020. "The New Empirics of Industrial Policy," Journal of Industry, Competition and Trade, Springer, vol. 20(2), pages 209-234, June.
    17. Radhakrishnan Gopalan & Kangzhen Xie, 2011. "Conglomerates and Industry Distress," The Review of Financial Studies, Society for Financial Studies, vol. 24(11), pages 3642-3687.
    18. Xiao, Gang & Shen, Sichen, 2022. "To pollute or not to pollute: Political connections and corporate environmental performance," Journal of Corporate Finance, Elsevier, vol. 74(C).
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Copestake, Alexander & Zhang, Wenzhang, 2023. "Inputs, networks and quality-upgrading: Evidence from China in India," China Economic Review, Elsevier, vol. 77(C).
    2. Johannes Boehm & Swati Dhingra & John Morrow, 2022. "The Comparative Advantage of Firms," Journal of Political Economy, University of Chicago Press, vol. 130(12), pages 3025-3100.
    3. Manova, Kalina & Yu, Zhihong, 2017. "Multi-product firms and product quality," Journal of International Economics, Elsevier, vol. 109(C), pages 116-137.
    4. Stiebale, Joel & Vencappa, Dev, 2018. "Acquisitions, markups, efficiency, and product quality: Evidence from India," Journal of International Economics, Elsevier, vol. 112(C), pages 70-87.
    5. repec:spo:wpmain:info:hdl:2441/1dn2prktaq9p3949il1h9ds86b is not listed on IDEAS
    6. repec:hal:wpspec:info:hdl:2441/1dn2prktaq9p3949il1h9ds86b is not listed on IDEAS
    7. Arnarson, Björn Thor, 2020. "The superstar and the followers: Intra-firm product complementarity in international trade," Journal of Economic Behavior & Organization, Elsevier, vol. 177(C), pages 277-304.
    8. Filippo Bontadini & Mercedes Campi & Marco Due~nas, 2023. "Being at the core: firm product specialisation," Papers 2302.02767, arXiv.org, revised Mar 2023.
    9. repec:hal:spmain:info:hdl:2441/1dn2prktaq9p3949il1h9ds86b is not listed on IDEAS
    10. Filippo Bontadini & Mercedes Campi & Marco Due~nas, 2023. "Being at the core: firm product specialisation," Papers 2302.02767, arXiv.org, revised Mar 2023.
    11. repec:spo:wpecon:info:hdl:2441/1dn2prktaq9p3949il1h9ds86b is not listed on IDEAS
    12. Fontagné, Lionel & Secchi, Angelo & Tomasi, Chiara, 2018. "Exporters’ product vectors across markets," European Economic Review, Elsevier, vol. 110(C), pages 150-180.
    13. Bloom, Nick & Manova, Kalina & Teng Sun, Stephen & Van Reenen, John & Yu, Zhihong, 2018. "Managing trade: evidence from China and the US," LSE Research Online Documents on Economics 88703, London School of Economics and Political Science, LSE Library.
    14. Eckel, Carsten & Irlacher, Michael, 2017. "Multi-product offshoring," European Economic Review, Elsevier, vol. 94(C), pages 71-89.
    15. Ming Xu & Tenglong Zhong & Qian Xie & Hongkui Liu, 2022. "Foreign Demand, Competition Strategy, and Export Markups: Evidence from Chinese Multi‐Product Exporters," China & World Economy, Institute of World Economics and Politics, Chinese Academy of Social Sciences, vol. 30(3), pages 187-209, May.
    16. Yuping Deng & Yanrui Wu & Helian Xu, 2019. "Environmental Regulation and Export Product Quality: Evidence from Chinese Firms," Economics Discussion / Working Papers 19-14, The University of Western Australia, Department of Economics.
    17. Lisandra Flach & Michael Irlacher, 2018. "Product versus Process: Innovation Strategies of Multiproduct Firms," American Economic Journal: Microeconomics, American Economic Association, vol. 10(1), pages 236-277, February.
    18. Rudy Colacicco, 2015. "Ten Years Of General Oligopolistic Equilibrium: A Survey," Journal of Economic Surveys, Wiley Blackwell, vol. 29(5), pages 965-992, December.
    19. Borchert, Lea & de Haas, Ralph & Kirschenmann, Karolin & Schultz, Alison, 2023. "Broken relationships: De-risking by correspondent banks and international trade," ZEW Discussion Papers 23-064, ZEW - Leibniz Centre for European Economic Research.
    20. Flora Bellone & Cilem Selin Hazir & Toshiyuki Matsuura, 2022. "Adjusting to China competition: Evidence from Japanese plant‐product‐level data," Review of International Economics, Wiley Blackwell, vol. 30(3), pages 732-763, August.
    21. Nicholas Bloom & Kalina Manova & John Van Reenen & Stephen Teng Sun & Zhihong Yu, 2021. "Trade and Management," The Review of Economics and Statistics, MIT Press, vol. 103(3), pages 443-460, July.
    22. Ariu, Andrea & Mayneris, Florian & Parenti, Mathieu, 2020. "One way to the top: How services boost the demand for goods," Journal of International Economics, Elsevier, vol. 123(C).
    23. Carsten Eckel & Leonardo Iacovone & Beata Javorcik & J. Peter Neary, 2016. "Testing the Core-competency Model of Multi-product Exporters," Review of International Economics, Wiley Blackwell, vol. 24(4), pages 699-716, September.
    24. García-Vega, María & Gupta, Apoorva & Kneller, Richard, 2023. "Is acquisition-FDI during an economic crisis detrimental for domestic innovation?," DICE Discussion Papers 403, Heinrich Heine University Düsseldorf, Düsseldorf Institute for Competition Economics (DICE).

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bla:chinae:v:32:y:2024:i:1:p:167-196. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Wiley Content Delivery (email available below). General contact details of provider: https://edirc.repec.org/data/iwepacn.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.