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The gradual evolution of buyer-seller networks and their role in aggregate fluctuations
Ryohei Hisano1, Tsutomu Watanabe2, Takayuki Mizuno3
11Social ICT Research Center, Graduate School of Information Science and Technology, The University of Tokyo, 7-3-1 Hongo, Bunkyo-ku, Tokyo, 113-8654 Japan.
Abstract:
Buyer-seller relationships among firms can be regarded as a longitudinal network in which the connectivity pattern evolves as each firm receives productivity shocks. Based on a data set describing the evolution of buyer-seller links among 55,608 firms over a decade and structural equation modeling, we find some evidence that interfirm networks evolve reflecting a firm's local decisions to mitigate adverse effects from neighbor firms through interfirm linkage, while enjoying positive effects from them. As a result, link renewal tends to have a positive impact on the growth rates of firms. We also investigate the role of networks in aggregate fluctuations.
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