Cascading shocks on heterogeneous enterprise production network

In highly interdependent enterprise production networks, shocks can diffuse across firms with different scales through transactional linkages. However, current research on shock diffusion in enterprise networks mainly focuses on macro level analyses, assuming homogeneous firm behavior, or focusing on specific sectors and industries, neglecting the heterogeneity in firm scale and structure that fundamentally shapes the dynamics of shock propagation. Motivated by this limitation, this study constructs a heterogeneous enterprise network model and proposes a cascading shock propagation model. The research incorporates the Cobb–Douglas production function into the propagation model, in order to characterize the relationship between input and output during shock diffusion, and to further reveals the distinct structural positions and functional roles of firms with different scales in shock propagation. The study finds that large and medium-sized firms tend to amplify initial shocks and accelerate shock propagation. Small and micro-sized firms exhibit higher vulnerability, which can trigger chain reactions even under localized disturbances. As the scale of the enterprise decreases, the number of affected enterprises gradually decreases, but the impact on their production is greater. These findings highlight the critical role of heterogeneity in shaping the dynamics of cascading shocks. Real cases and stock data validate the conclusions.