NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Yukiko U. Saito

Research Institute of Economy, Trade
and Industry (RIETI)
11th floor, Annex
Ministry of Economy, Trade and Industry (METI)
1-3-1 Kasumigaseki Chiyoda-ku
Tokyo, 100-8901 Japan

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NBER Working Papers and Publications

April 2015Production Networks, Geography and Firm Performance
with Andrew B. Bernard, Andreas Moxnes: w21082
This paper examines the importance of buyer-supplier relationships, geography and the structure of the production network in firm performance. We develop a simple model where firms can outsource tasks and search for suppliers in different locations. Low search and outsourcing costs lead firms to search more and find better suppliers. This in turn drives down the firm's marginal production costs. We test the theory by exploiting the opening of a high-speed (Shinkansen) train line in Japan which lowered the cost of passenger travel but left shipping costs unchanged. Using an exhaustive dataset on firms' buyer-seller linkages, we find significant improvements in firm performance as well as creation of new buyer-seller links, consistent with the model.
 
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