When Life Gives You Lemons: Competition, Diversification, and Firm Resilience
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Date
2024-08-07
Authors
Gamrat, Gretchen
Journal Title
Journal ISSN
Volume Title
Publisher
University of Oregon
Abstract
This study explores how product market competition and diversification relate to private and public firmresilience. Using retail scanner data, I construct firm-level measures of competition and product diversification closer to the product level and leverage the 2008 financial crisis and COVID-19 pandemic as sources of
plausibly exogenous variation. Private firms tend to be smaller, less diversified, face greater competition and
have greater revenue growth volatility. During the 2008 financial crisis and COVID-19 pandemic, higher
market competition is significantly correlated with reduced revenue growth and revenue growth volatility.
More diversified public and private firms experience reduced revenue growth volatility in non-crisis periods.
However, diversification’s risk reduction capabilities significantly weaken during the COVID-19 pandemic.