Kalina Manova, Zhihong Yu, 22 September 2017

Pinpointing how multi-product firms organise their operations is key for understanding the drivers of global competitiveness. This column presents a theory on the behaviour of multi-product firms when cost and quality competitiveness jointly determine export performance. Using Chinese data, it finds that firms’ production and sales activity across products and markets is governed by a product hierarchy based on quality. This phenomenon also determines how firms respond to economic shocks.

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