Production Networks, Geography and Firm Performance

52 Pages Posted: 20 Apr 2015

See all articles by Andrew B. Bernard

Andrew B. Bernard

Dartmouth College - Tuck School of Business; National Bureau of Economic Research (NBER); Centre for Economic Policy Research (CEPR)

Andreas Moxnes

University of Oslo - Department of Economics; Centre for Economic Policy Research (CEPR); National Bureau of Economic Research (NBER)

Yukiko Saito

早稲田大学; Waseda University - School of Political Science and Economics; Research Institute of Economy, Trade and Industry (RIETI)

Multiple version iconThere are 2 versions of this paper

Date Written: April 2015

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: firm-to-firm neworks, infrastructure, productivity, trade

JEL Classification: D22, D85, F14, L10, L14, R12

Suggested Citation

Bernard, Andrew B. and Moxnes, Andreas and Saito, Yukiko, Production Networks, Geography and Firm Performance (April 2015). CEPR Discussion Paper No. DP10551, Available at SSRN: https://ssrn.com/abstract=2596631

Andrew B. Bernard (Contact Author)

Dartmouth College - Tuck School of Business ( email )

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National Bureau of Economic Research (NBER)

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Andreas Moxnes

University of Oslo - Department of Economics ( email )

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Centre for Economic Policy Research (CEPR) ( email )

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National Bureau of Economic Research (NBER) ( email )

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Yukiko Saito

早稲田大学 ( email )

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Japan
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Waseda University - School of Political Science and Economics ( email )

1-6-1 Nishi-Waseda
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Japan

Research Institute of Economy, Trade and Industry (RIETI) ( email )

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Tokyo 100-8901
Japan

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