Production Networks, Geography and Firm Performance

Working Paper No. 21082 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...

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Bibliographic Details
Published in:NBER Working Paper Series 2015-04, p.21082
Main Authors: Bernard, Andrew B, Moxnes, Andreas, Saito, Yukiko U
Format: Article
Language:English
Subjects:
Analysis
Costs
Customers
Economic theory
Geography
High speed rail
Infrastructure
International trade
Outsourcing
Production costs
Productivity
Studies
Suppliers
Vendor supplier relations
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Summary:Working Paper No. 21082 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.
ISSN:0898-2937
DOI:10.3386/w21082