Product Pioneers and Followers’ Choices on New vs Existing Plant to Product New Products: Evidence from Korean Manufacturing and Implications on Learning Spillovers

Abstract

This paper examines whether product pioneers differ from product followers in their decision to establish a new plant to product a new product, utilizing a firm-plant-product dataset for Korean manufacturing from 1990 to 1996. We find that followers are more likely to establish a new plant rather than utilize existing plants to product a product which is new to the plant. We also find that establishing a new plant is accompanied by a larger investment than utilizing existing plants. These results seem consistent with the existence of pioneer-to-follower learning spillovers, possibly in the sense that followers face less uncertainty about the future profitability of the new product.