Working Paper: NBER ID: w21082
Authors: Andrew B. Bernard; Andreas Moxnes; Yukiko U. Saito
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.
Keywords: production networks; geography; firm performance; buyer-supplier relationships; infrastructure
JEL Codes: D22; D85; F14; L10; L14; R12
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| shinkansen expansion (H54) | firm performance (L25) |
| shinkansen expansion (H54) | sales for input-intensive firms (D25) |
| firm location near new shinkansen stations (R33) | improved performance (D29) |
| increase in number of suppliers (D16) | improved performance (D29) |
| shinkansen expansion (H54) | increase in number of connections (F62) |
| increase in number of connections (F62) | improved performance (D29) |
| greater purchased input shares (F62) | better performance (D29) |