Review of Industrial Organization 15: 219–237, 1999.
© 1999 Kluwer Academic Publishers. Printed in the Netherlands.
The Survival of New Products
MARCUS ASPLUND and RICKARD SANDIN
Department of Economics, Stockholm School of Economics, Box 6501, SE-113 83 Stockholm,
Abstract. We study the survival of new products in a market with horizontal product differentiation
and rapid product turnover. Our data set consists of monthly sales for all new products in the Swedish
beer market during 1989–1995. Results show that products with low and decreasing market shares
have high hazard rates. The hazard rates are also dependent on ﬁrm characteristics; products from
ﬁrms with the largest market shares face a greater risk of being withdrawn. We argue that high hazard
rates of new products can help to explain high failure rates of new ﬁrms.
Key words: Product survival, multiproduct ﬁrms, duration model, beer market.
Launching a new product involves many uncertain elements and it is therefore not
surprising that many products disappear quickly. At the same time, other products
reach dominant positions and keep those for very long periods, several decades
in many cases. Although there is a large literature on market shares and lives of
the leading or pioneering products in various industries such as Budweiser and
Kellogg’s Corn Flakes in the U.S. (see, for example, Golder and Tellis, 1993;
Sutton, 1991), few have studied the life of the average product. We all know that
every new product will not become a jackpot, and focusing on the great success
stories may therefore give a distorted picture of the prospects of new products.
The issue is relevant as product performance form the basis of ﬁrm performance
and, in particular, the survival of new ﬁrms. If a product wins consumer approval,
its market share will rise and generate proﬁts to the ﬁrm. On the other hand, if
its popularity falls the ﬁrm may experience a serious cash ﬂow shortage, which
may eventually lead to product displacement or even ﬁrm exit. The dependence
of product performance will be of the greatest consequence to ﬁrms who enter
We would like to thank Steve Davies, Tore Ellingsen, Kasper Roszbach, two anonymous refer-
ees, and seminar participants at the 23rd Annual Meeting of the European Association for Research
in Industrial Economics, London School of Economics and Political Science, Norwegian School of
Economics and Business Administration, and Stockholm School of Economics. Discussions with
Björn Lundquist and Leif Magnusson at Systembolaget AB have been invaluable. The ﬁrst author
acknowledges ﬁnancial support from the Swedish Competition Authority and Jan Wallander’s and
Tom Hedelius’ Foundation, and the second author from the Tore Browaldh Foundation.