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Interfirm Relationships and Business Performance

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  • Jing Cai
  • Adam Szeidl

Abstract

We organized business associations for the owner-managers of randomly selected young Chinese firms to study the effect of business networks on firm performance. We randomized 2,800 firms into small groups whose managers held monthly meetings for one year, and into a “no- meetings” control group. We find that: (1) The meetings increased firm revenue by 8.1 percent, and also significantly increased profit, factors, inputs, the number of partners, borrowing, and a management score; (2) These effects persisted one year after the conclusion of the meetings; and (3) Firms randomized to have better peers exhibited higher growth. We exploit additional interventions to document concrete channels. (4) Managers shared exogenous business-relevant information, particularly when they were not competitors, showing that the meetings facilitated learning from peers. (5) Managers created more business partnerships in the regular than in other one-time meetings, showing that the meetings improved supplier-client matching. (6) Firms whose managers discussed management, partners, or finance improved more in the associated domain, suggesting that the content of conversations shaped the nature of gains.

Suggested Citation

  • Jing Cai & Adam Szeidl, 2016. "Interfirm Relationships and Business Performance," NBER Working Papers 22951, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:22951
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    References listed on IDEAS

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    Cited by:

    1. Javier Mejia, 2018. "Social Networks and Entrepreneurship. Evidence from a Historical Episode of Industrialization," Working Papers 20180020, New York University Abu Dhabi, Department of Social Science, revised Sep 2018.
    2. Enghin Atalay & Ali Hortaçsu & Mary Jialin Li & Chad Syverson, 2017. "How Wide Is the Firm Border?," Working Papers 17-35, Center for Economic Studies, U.S. Census Bureau.
    3. Achyuta Adhvaryu & Namrata Kala & Anant Nyshadham, 2018. "The Light and the Heat: Productivity Co-benefits of Energy-saving Technology," NBER Working Papers 24314, National Bureau of Economic Research, Inc.
    4. SHIMAMOTO Daichi & Yu Ri KIM & TODO Yasuyuki, 2019. "The Effect of Social Interactions on Exporting Activities: Evidence from Micro, Small, and Medium-Sized Enterprises in rural Vietnam," Discussion papers 19020, Research Institute of Economy, Trade and Industry (RIETI).
    5. Yukiko Saito & Makoto Nirei & Vasco Carvalho, 2014. "Supply Chain Disruptions: Evidence from Great East Japan Earthquake," 2014 Meeting Papers 595, Society for Economic Dynamics.
    6. Dalton, Patricio & Rüschenpöhler, Julius & Uras, Burak & Zia, Bilal, 2019. "Local Best Practices for Business Growth," Discussion Paper 2019-015, Tilburg University, Center for Economic Research.
    7. Huber, Kilian & Lindenthal, Volker & Waldinger, Fabian, 2018. "Discrimination, Managers, and Firm Performance: Evidence from "Aryanizations" in Nazi Germany," CEPR Discussion Papers 13089, C.E.P.R. Discussion Papers.
    8. Dai, R. & Mookherjee, D. & Munshi, K. & Zhang, X., 2018. "Community Networks and the Growth of Private Enterprise in China," Cambridge Working Papers in Economics 1850, Faculty of Economics, University of Cambridge.
    9. Bisztray, Márta & Koren, Miklós & Szeidl, Adam, 2018. "Learning to import from your peers," Journal of International Economics, Elsevier, vol. 115(C), pages 242-258.
    10. repec:spr:epolit:v:36:y:2019:i:1:d:10.1007_s40888-018-0121-7 is not listed on IDEAS
    11. Daichi Shimamoto & Yasuyuki Todo & Yu Ri Kim & Petr Matous, 2017. "Identifying and Decomposing Peer Effects on Decision-Making Using a Randomized Controlled Trial," Working Papers 1704, Waseda University, Faculty of Political Science and Economics.
    12. Richard W. Carney & Travers Barclay Child, 2015. "Business Networks and Crisis Performance: Professional, Political, and Family Ties," Tinbergen Institute Discussion Papers 15-135/V, Tinbergen Institute, revised 20 Feb 2015.

    More about this item

    JEL classification:

    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
    • L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation
    • O12 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Microeconomic Analyses of Economic Development
    • O14 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Industrialization; Manufacturing and Service Industries; Choice of Technology

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