Interfirm Relationships and Business Performance

54 Pages Posted: 18 Nov 2021

See all articles by Jing Cai

Jing Cai

University of Michigan at Ann Arbor

Adam Szeidl

Central European University

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Abstract

We organized business associations for the owner-managers of young Chinese firms to study the effect of business networks on firm performance. We randomized 2,820 firms into small groups whose managers held monthly meetings for one year, and into a “no-meetings” control group. We find the following. (i) The meetings increased firm revenue by 8.1%, and also significantly increased profit, factors, inputs, the number of partners, borrowing, and a management score. (ii) These effects persisted one year after the conclusion of the meetings. (iii) Firms randomized to have better peers exhibited higher growth. We exploit additional interventions to document concrete channels. (iv) Managers shared exogenous business-relevant information, particularly when they were not competitors, showing that the meetings facilitated learning from peers. (v) Managers created more business partnerships in the regular than in other one-time meetings, showing that the meetings improved supplier-client matching.

Keywords: Firm Behavior, Empirical Analysis, Transactional Relationships, Contracts and Reputation, Networks, Microeconomic Analyses of Economic Development, Industrialization, Manufacturing and Service Industries, Choice of Technology

JEL Classification: D22, O12, O14, L14

Suggested Citation

Cai, Jing and Szeidl, Adam, Interfirm Relationships and Business Performance. Quarterly Journal of Economics, Vol. 133, No. 3, pp. 1229-1282, 2018, Available at SSRN: https://ssrn.com/abstract=3932149

Jing Cai

University of Michigan at Ann Arbor ( email )

500 S. State Street
Ann Arbor, MI 48109
United States

Adam Szeidl (Contact Author)

Central European University ( email )

Nador u. 9.
Budapest H-1051
Hungary
+36 1 327 3000 (Phone)
+36 1 327 3232 (Fax)

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