Inter-firm Transaction Networks and Location in a City

This study contributes to the literature on the relationship between geographical and relation-based distances of economic agents. We aim to estimate the causal effect of a firm's position in the inter-firm transaction network on its spatial location within a city. Using micro data of inter-firm financial transactions for non-retail firms in the metropolitan areas of Japan, we demonstrate that the more central firms in transaction networks tend to have smaller inter-firm distances and therefore locate at more accessible places within the city. We also find that the results are robust to alternative specifications both of network centrality measures and spatial accessibility measures. It is also declared that the effect for single establishment firms are much stronger than that for multi-establishment firms. Furthermore, the result shows that this effect is noticeable for young firms in knowledge-intensive industries. The evidence suggests the potential importance of the inter-firm transaction pattern as a determinant of urban spatial configuration.