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Production networks, geography and firm performance

Bernard, Andrew B., Moxnes, Andreas and Saito, Yukiko U. (2016) Production networks, geography and firm performance. CEP Discussion Paper (1435). Centre for Economic Performance, London School of Economics and Political Science, London, UK.

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Abstract

This paper examines the importance of buyer-supplier relationships, geography and the structure of the production network in firm performance. We develop a simple model where firms can outsource tasks and search for suppliers in different locations. Low search and outsourcing costs lead firms to search more and find better suppliers. This in turn drives down the firm’s marginal production costs. We test the theory by exploiting the opening of a high-speed (Shinkansen) train line in Japan which lowered the cost of passenger travel but left shipping costs unchanged. Using an exhaustive dataset on firms’ buyer-seller linkages, we find significant improvements in firm performance as well as creation of new buyer-seller links, consistent with the model.

Item Type: Monograph (Discussion Paper)
Official URL: http://cep.lse.ac.uk/
Additional Information: © 2016 The Authors
Divisions: Centre for Economic Performance
Subjects: H Social Sciences > HD Industries. Land use. Labor > HD28 Management. Industrial Management
JEL classification: D - Microeconomics > D8 - Information, Knowledge, and Uncertainty > D85 - Network Formation and Analysis: Theory
F - International Economics > F1 - Trade > F14 - Country and Industry Studies of Trade
L - Industrial Organization > L1 - Market Structure, Firm Strategy, and Market Performance > L10 - General
L - Industrial Organization > L1 - Market Structure, Firm Strategy, and Market Performance > L14 - Transactional Relationships; Contracts and Reputation; Networks
R - Urban, Rural, and Regional Economics > R1 - General Regional Economics > R12 - Size and Spatial Distributions of Regional Economic Activity; Interregional Trade
Sets: Research centres and groups > Centre for Economic Performance (CEP)
Date Deposited: 09 Sep 2016 12:03
Last Modified: 02 Jul 2019 23:26
Funders: Economic and Social Research Council, Economic and Social Research Council
URI: http://eprints.lse.ac.uk/id/eprint/67664

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