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Firm-to-Firm Referrals

Author

Listed:
  • Jing Cai
  • Wei Lin
  • Adam Szeidl

Abstract

We make randomized firm-to-firm referrals between 700 supplier and client firms in the industry producing the Chinese writing brush. Subsidized referrals lead to subsequent transactions and a partial crowding out of prior partners; information-only referrals have no effect. The referrals increase revenue, profit, and hours worked in supplier firms and growth-oriented client firms. Treated suppliers increase product quality, while treated clients expand product variety into higher-quality products, suggesting that the referrals enable complementary upgrading. Treated firms increase beliefs about the value of partners, search for partners, and the number of non-referred partners, suggesting that pessimistic beliefs is a key partnering friction. The referrals generate very large private and social returns.

Suggested Citation

  • Jing Cai & Wei Lin & Adam Szeidl, 2024. "Firm-to-Firm Referrals," NBER Working Papers 33082, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:33082
    Note: DEV PR
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    More about this item

    JEL classification:

    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
    • L20 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - General
    • O12 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Microeconomic Analyses of Economic Development

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