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The Structure and Evolution of Buyer-Supplier Networks

  • Takayuki Mizuno

    (National Institute of Informatics)

  • Wataru Souma

    (Nihon University)

  • Tsutomu Watanabe

    (The University of Tokyo)

Registered author(s):

    In this paper, we investigate the structure and evolution of customer-supplier networks in Japan using a unique dataset that contains information on customer and supplier linkages for more than 500,000 incorporated non-financial firms for the five years from 2008 to 2012. We find, first, that the number of customer links is unequal across firms; the customer link distribution has a power-law tail with an exponent of unity (i.e., it follows Zipf’s law). We interpret this as implying that competition among firms to acquire new customers yields winners with a large number of customers, as well as losers with fewer customers. We also show that the shortest path length for any pair of firms is, on average, 4.3 links. Second, we find that link switching is relatively rare. Our estimates indicate that the survival rate per year for customer links is 92 percent and for supplier links 93 percent. Third and finally, we find that firm growth rates tend to be more highly correlated the closer two firms are to each other in a customer-supplier network (i.e., the smaller is the shortest path length for the two firms). This suggests that a non-negligible portion of fluctuations in firm growth stems from the propagation of microeconomic shocks – shocks affecting only a particular firm – through customer-supplier chains.

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    File URL: http://www.carf.e.u-tokyo.ac.jp/pdf/workingpaper/fseries/F339.pdf
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    Paper provided by Center for Advanced Research in Finance, Faculty of Economics, The University of Tokyo in its series CARF F-Series with number CARF-F-339.

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    Length: 24 pages
    Date of creation: Jan 2014
    Date of revision:
    Handle: RePEc:cfi:fseres:cf339
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    1. Bryan Kelly & Hanno Lustig & Stijn Van Nieuwerburgh, 2013. "Firm Volatility in Granular Networks," NBER Working Papers 19466, National Bureau of Economic Research, Inc.
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    9. Daron Acemoglu & Asuman Ozdaglar & Alireza Tahbaz-Salehi, 2013. "The Network Origins of Large Economic Downturns," NBER Working Papers 19230, National Bureau of Economic Research, Inc.
    10. Battiston, Stefano & Delli Gatti, Domenico & Gallegati, Mauro & Greenwald, Bruce & Stiglitz, Joseph E., 2007. "Credit chains and bankruptcy propagation in production networks," Journal of Economic Dynamics and Control, Elsevier, vol. 31(6), pages 2061-2084, June.
    11. Leena Rudanko & Francois Gourio, 2010. "Customer Capital," 2010 Meeting Papers 121, Society for Economic Dynamics.
    12. Y. Fujiwara & H. Aoyama, 2010. "Large-scale structure of a nation-wide production network," The European Physical Journal B - Condensed Matter and Complex Systems, Springer, vol. 77(4), pages 565-580, October.
    13. Leena Rudanko & Francois Gourio, 2011. "Customer capital and the business cycle," 2011 Meeting Papers 120, Society for Economic Dynamics.
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