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

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  • 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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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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References

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Cited by:
  1. Roberto Antonietti & Giulio Cainelli & Monica Ferrari & Stefania Tomasini, 2014. "Banks, industrial relatedness and firms’ investments," Papers in Evolutionary Economic Geography (PEEG) 1402, Utrecht University, Section of Economic Geography, revised Jan 2014.

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