Product Turnover: Simultaneous Product Market Entry and Exit

Resource redeployment may occur when a firm exits from one line of business and enters another. We suggest that when multiproduct firms identify opportunities in new high-growth markets, their entry will occur alongside exit from low-growth markets when the firm is resource-constrained. For our sample of over 47,000 high-tech US firms in CorpTech from 1993 to 2004, 5% of the firm-years include simultaneous entry and exit at the product market level, which we term “product turnover.” Firms are more likely to engage in product turnover when there is a larger spread between the highest and lowest growth rates for the product markets in the firm’s portfolio. This effect is strongest for small- and medium-sized firms, which tend to be privately held. Therefore, future research on resource redeployment might find fruitful ground in samples of mid-size firms.