Production and financial linkages in inter-firm networks: structural variety, risk-sharing and resilience

Giulio Cainelli, Sandro Montresor () and Giuseppe Vittucci Marzetti

Journal of Evolutionary Economics, 2012, vol. 22, issue 4, 734 pages

Abstract: The paper analyzes how (production and financial) inter-firm networks can affect firms’ default probabilities and observed default rates. A simple theoretical model of shock transfer is built to investigate some stylized facts on how firm-idiosyncratic shocks are allocated in the network, and how this allocation changes firm default probabilities. The model shows that the network works as a perfect “risk-pooling” mechanism, when it is both strongly connected and symmetric. But the “risk-sharing” does not necessarily reduce default rates, unless the shock firms face is lower on average than their financial capacity. Conceived as cases of symmetric inter-firm networks, industrial districts might have a comparative disadvantage in front of heavy crises. Copyright Springer-Verlag 2012

Keywords: Firm clusters; Industrial districts; Interlinking transactions; Resilience; Systemic risk; R11; R12; G20 (search for similar items in EconPapers)
Date: 2012
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DOI: 10.1007/s00191-012-0280-6

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