Energy and resilience: The effects of endogenous interdependencies on trade network formation across space among major Japanese firms

The dynamic drivers of interfirm interactions across space have rarely been explored in the context of disaster recovery; therefore, the mechanism through which shocks propagate is unclear. This paper uses stochastic actor-oriented modeling to examine how trade networks among the 500 largest Japanese companies evolved during 2010 and 2011, i.e. before and after the Great East Japan Earthquake to identify sources of vulnerability in the system. In contrast to previous reports on broken supply chains, the network displayed only modest change even in the directly affected areas. Controlling for distance and for firm size, we find that when firms changed their partners, they preferred firms that were popular among other firms, that had partners in common with them and that also bought some products or services from them. These findings concur with a criticism that Japanese firms avoid external actors and exhibit inflexibility in reorganizing their networks in times of need, which contrasts with the non-cliquish network structures observed in high-performing economic sectors. The results also highlight the role of energy firms in disaster resilience. Unlike other large Japanese companies that cluster in major urban centers, energy firms are distributed across Japan. However, despite their peripheral physical locations, energy firms are centrally located in trade networks. Thus, while a disaster in any region may affect some energy firms and lead to large-scale temporary shocks, the entire network is unlikely to be disconnected by any region-specific disaster because of the spatial distribution of the topological network core formed by energy companies.