Cross-Border Product Diffusion

Abstract

This paper investigates how new product varieties enter local markets and become available to consumers. We provide causal evidence of demand externalities that operate in two steps. First, information about new varieties spreads directly through consumers’ social ties. Second, early purchases generate an indirect spillover to firms, as retailers learn from “pioneer” consumers which products are likely to succeed and adjust their assortments accordingly. Overall, the findings demonstrate how social diffusion and retailer learning generate demand multipliers that reshape local product availability and expand access to global variety.