Sara Moreira Publications

We construct a new dataset to show that successful entrants in the consumer food sector build market share by adding new customers. Entrants reach new customers by entering more geographical markets, placing their product in more stores in these markets, and, for a positively selected subset of firms, advertising directly to customers. These activities are costly and are associated with persistent increases in quantities, but there are no differences in markups between new and mature markets. This confirms a central role for marketing and advertising in overcoming demand-side frictions that slow firm growth.

We document that sales of individual products decline steadily throughout most of the product life cycle. Products quickly become obsolete as they face competition from newer products sold by competing firms and the same firm. We build a dynamic model that highlights an innovation-obsolescence cycle, where firms need to introduce new products to grow; otherwise, their portfolios become obsolete as rivals introduce their own new products. By introducing new products, however, firms accelerate the decline of their own existing products, further depressing their sales. This mechanism has sizable implications for quantifying economic growth and the impact of innovation policies.