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The Structure and Evolution of Buyer-Supplier Networks

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  • Takayuki Mizuno

    (National Institute of Informatics)

  • Wataru Souma

    (Nihon University)

  • Tsutomu Watanabe

    (The University of Tokyo)

Abstract

In this paper, we investigate the structure and evolution of customer-supplier networks in Japan using a unique dataset that contains information on customer and supplier linkages for more than 500,000 incorporated non-financial firms for the five years from 2008 to 2012. We find, first, that the number of customer links is unequal across firms; the customer link distribution has a power-law tail with an exponent of unity (i.e., it follows Zipf's law). We interpret this as implying that competition among firms to acquire new customers yields winners with a large number of customers, as well as losers with fewer customers. We also show that the shortest path length for any pair of firms is, on average, 4.3 links. Second, we find that link switching is relatively rare. Our estimates indicate that the survival rate per year for customer links is 92 percent and for supplier links 93 percent. Third and finally, we find that firm growth rates tend to be more highly correlated the closer two firms are to each other in a customer-supplier network (i.e., the smaller is the shortest path length for the two firms). This suggests that a non-negligible portion of fluctuations in firm growth stems from the propagation of microeconomic shocks-shocks affecting only a particular firm-through customer-supplier chains.

Suggested Citation

  • Takayuki Mizuno & Wataru Souma & Tsutomu Watanabe, 2014. "The Structure and Evolution of Buyer-Supplier Networks," CARF F-Series CARF-F-339, Center for Advanced Research in Finance, Faculty of Economics, The University of Tokyo.
  • Handle: RePEc:cfi:fseres:cf339
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    File URL: https://www.carf.e.u-tokyo.ac.jp/old/pdf/workingpaper/fseries/F339.pdf
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    References listed on IDEAS

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    Cited by:

    1. Hazem Krichene & Abhijit Chakraborty & Hiroyasu Inoue & Yoshi Fujiwara, 2017. "Business cycles’ correlation and systemic risk of the Japanese supplier-customer network," PLOS ONE, Public Library of Science, vol. 12(10), pages 1-22, October.
    2. Hirokazu Kawamoto & Hideki Takayasu & Henrik Jeldtoft Jensen & Misako Takayasu, 2015. "Precise Calculation of a Bond Percolation Transition and Survival Rates of Nodes in a Complex Network," PLOS ONE, Public Library of Science, vol. 10(4), pages 1-16, April.
    3. Mundt, Philipp, 2021. "The formation of input–output architecture: Evidence from the European Union," Journal of Economic Behavior & Organization, Elsevier, vol. 183(C), pages 89-104.
    4. Chakraborty, Abhijit & Krichene, Hazem & Inoue, Hiroyasu & Fujiwara, Yoshi, 2019. "Characterization of the community structure in a large-scale production network in Japan," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 513(C), pages 210-221.
    5. Mungo, Luca & Lafond, François & Astudillo-Estévez, Pablo & Farmer, J. Doyne, 2023. "Reconstructing production networks using machine learning," Journal of Economic Dynamics and Control, Elsevier, vol. 148(C).
    6. Hernández, Juan M. & González-Martel, Christian, 2017. "An evolving model for the lodging-service network in a tourism destination," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 482(C), pages 296-307.
    7. Leonidov, Andrey & Serebryannikova, Ekaterina, 2019. "Dynamical topology of highly aggregated input–output networks," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 518(C), pages 234-252.
    8. Atushi Ishikawa & Shouji Fujimoto & Takayuki Mizuno & Tsutomu Watanabe, 2016. "Long-term firm growth properties derived from short-term laws of sales and number of employees in Japan and France," Evolutionary and Institutional Economics Review, Springer, vol. 13(2), pages 409-422, December.
    9. FUJIWARA Yoshi & TERAI Masaaki & FUJITA Yuji & SOUMA Wataru, 2016. "DebtRank Analysis of Financial Distress Propagation on a Production Network in Japan," Discussion papers 16046, Research Institute of Economy, Trade and Industry (RIETI).
    10. Takayuki Mizuno & Takaaki Ohnishi & Tsutomu Watanabe, 2015. "Structure of global buyer-supplier networks and its implications for conflict minerals regulations," Papers 1505.02274, arXiv.org.
    11. David C. Earnest & Ian F. Wilkinson, 2018. "An agent based model of the evolution of supplier networks," Computational and Mathematical Organization Theory, Springer, vol. 24(1), pages 112-144, March.
    12. Mary Han & Bill McKelvey, 2016. "How to Grow Successful Social Entrepreneurship Firms? Key Ideas from Complexity Theory," Journal of Enterprising Culture (JEC), World Scientific Publishing Co. Pte. Ltd., vol. 24(03), pages 243-280, September.
    13. Takayuki Mizuno & Takaaki Ohnishi & Tsutomu Watanabe, 2015. "Structure of global buyer-supplier networks and its implications for conflict minerals regulations," UTokyo Price Project Working Paper Series 053, University of Tokyo, Graduate School of Economics.
    14. Takayuki Mizuno & Takaaki Ohnishi & Tsutomu Watanabe, 2015. "Structure of global buyer-supplier networks and its implications for conflict minerals regulations," CARF F-Series CARF-F-362, Center for Advanced Research in Finance, Faculty of Economics, The University of Tokyo.
    15. Vipin P. Veetil & Lawrence H. White, 2017. "Towards a New Austrian Macroeconomics," The Review of Austrian Economics, Springer;Society for the Development of Austrian Economics, vol. 30(1), pages 19-38, March.

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