Renewal of Companies Through Product Switching

The past few decades have witnessed a slowdown in productivity growth in many advanced economies, including Finland. This study examines product switching in Finnish manufacturing firms from 2009 to 2019. The findings reveal a notable trend towards specialization, with more firms focusing on a single product, leading to reduced overall product diversity over time. Larger firms, in terms of value added, sales, and employment, tend to be multi-product firms with diverse output, and they are more likely to engage in export activities compared to single-product firms. Although single-product firms exhibit higher productivity levels, the study establishes a positive correlation between product diversity and productivity. Furthermore, the study demonstrates that expanding or contracting product scopes is linked to an increase in firm size compared to firms with unchanged product scopes. Overall, our findings highlight the close relationship between product switching and the economic outcomes of Finnish manufacturing firms