Working Paper: NBER ID: w22951
Authors: 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.
Keywords: business networks; firm performance; randomized controlled trial; China; small and medium enterprises
JEL Codes: D22; L14; O12; O14
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| monthly meetings (A32) | firm revenue (G30) |
| monthly meetings (A32) | profit (L21) |
| monthly meetings (A32) | production factors (E23) |
| monthly meetings (A32) | inputs (Y20) |
| monthly meetings (A32) | number of partners (J12) |
| monthly meetings (A32) | borrowing (G51) |
| monthly meetings (A32) | management score (M54) |
| monthly meetings (A32) | sales (M31) |
| monthly meetings (A32) | number of clients (L84) |
| monthly meetings (A32) | number of suppliers (L81) |
| monthly meetings (A32) | management practices (M54) |
| monthly meetings (A32) | knowledge diffusion (O36) |
| regular meetings (F53) | business partnerships (L14) |
| discussing management, partners, or finance (M13) | improvement in associated domains (Y80) |