Does product complexity matter for firms' TFP?

This study investigated the complexity-productivity linkage at the firm level. Using data on a large sample of Chinese manufacturing sector firms from 2000 to 2006, the complexity of a firm was evaluated via product complexity. Product complexity was found to be positively related to a higher productivity level. This finding remained robust after several sensitivity checks, sample selection, and the use of alternative complexity and productivity indicators. Across different sectors and provinces, technological factors explained the effect of complexity on productivity. specialization in more complex products exerted a mediating impact between technological factors and firm productivity.