Multi- Product Firms, Tariff Liberalization and Product Churning in Vietnamese Manufacturing

This study documents the frequency and characteristics of multi-product firms in Vietnamese manufacturing. The major findings are as follows. First, multi-product firms are larger, more capital-intensive, more productive, and are more likely to export. Second, multi-product firms are active in the market. Approximately 60% of firms adjust their product scope within a 6-year period. Third, the contribution of firms’ product extensive margin to aggregate output growth is limited due to the prevalence of product dropping, which offsets the positive impact of product adding. Most output growth during the period is thus generated by the intensive margin. Turning to the link between tariff reduction and product shedding, it does not detect any significant impact. However, it finds that exporters play an important role in product adding, which suggests that they may contribute to aggregate growth through the channeling of product scope expansion. Contrary to the expectations, the analysis offers limited support for the heterogeneity of product turnover across ownership types. While it finds that state-owned enterprises are more likely to spread economic activities across products and industries, there is little difference in terms of product churning amongst foreign direct investment, state-owned enterprises, and the domestic private sector.