Industry Networks and the Geography of Firm Behavior

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See all articles by William Grieser

William Grieser

Texas Christian University

James P. LeSage

Texas State University - McCoy College of Business Administration

Morad Zekhnini

Tulane University

Date Written: March 16, 2020

Abstract

We consider the role of local geographic peers in determining equilibrium firm behavior. We exploit intransitivity in local peer-firm networks and utilize spatial econometric techniques to circumvent well-known challenges in estimating and interpreting empirical models of peer effects. We find that geography network effects play a highly significant causal role in explaining corporate investment decisions, and these effects play a much more modest role in explaining financial policies and firm performance. We then implement a novel structured network regression to separately identify the effects of geography, product markets, and supply-chain networks. We find that local externalities in firm behavior operate almost exclusively within industry boundaries, and geographic effects outside industry boundaries are moderately evident only for corporate investment decisions.

Keywords: Networks, Peer Effects, Agglomeration Economies, Corporate Investment, Capital Structure, Firm Performance, Geography, Spatial Econometrics

JEL Classification: G10, G31, G32, L20, L23, L25, R10, R11, R12, R15

Suggested Citation

Grieser, William and LeSage, James P. and Zekhnini, Morad, Industry Networks and the Geography of Firm Behavior (March 16, 2020). Available at SSRN: https://ssrn.com/abstract=

William Grieser (Contact Author)

Texas Christian University ( email )

Fort Worth, TX 76129
United States

James P. LeSage

Texas State University - McCoy College of Business Administration ( email )

Finanace and Economics Department
601 University Drive
San Marcos, TX 78666
United States
512-245-0256 (Phone)
512-245-3089 (Fax)

HOME PAGE: http://www.spatial-econometrics.com

Morad Zekhnini

Tulane University ( email )

A.B. Freeman School of Business
7 McAlister Drive
New Orleans, LA 70118
United States

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