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Production and financial linkages in inter-firm networks: structural variety, risk-sharing and resilience

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Author Info

  • Giulio Cainelli

    ()

  • Sandro Montresor

    ()

  • Giuseppe Vittucci Marzetti

    ()

Abstract

The paper analyzes how (production and financial) inter-firm networks can affect firms’ default probabilities and observed default rates. A simple theoretical model of shock transfer is built to investigate some stylized facts on how firm-idiosyncratic shocks are allocated in the network, and how this allocation changes firm default probabilities. The model shows that the network works as a perfect “risk-pooling” mechanism, when it is both strongly connected and symmetric. But the “risk-sharing” does not necessarily reduce default rates, unless the shock firms face is lower on average than their financial capacity. Conceived as cases of symmetric inter-firm networks, industrial districts might have a comparative disadvantage in front of heavy crises. Copyright Springer-Verlag 2012

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File URL: http://hdl.handle.net/10.1007/s00191-012-0280-6
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Bibliographic Info

Article provided by Springer in its journal Journal of Evolutionary Economics.

Volume (Year): 22 (2012)
Issue (Month): 4 (September)
Pages: 711-734

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Handle: RePEc:spr:joevec:v:22:y:2012:i:4:p:711-734

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Related research

Keywords: Firm clusters; Industrial districts; Interlinking transactions; Resilience; Systemic risk; R11; R12; G20;

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  1. López-Pintado, Dunia, 2008. "Diffusion in complex social networks," Games and Economic Behavior, Elsevier, vol. 62(2), pages 573-590, March.
  2. Anne Ter Wal & Ron Boschma, 2011. "Co-evolution of Firms, Industries and Networks in Space," Regional Studies, Taylor and Francis Journals, vol. 45(7), pages 919-933.
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