Firm-to-Firm Referrals

Jing Cai, Wei Lin and Adam Szeidl

No 33082, NBER Working Papers from National Bureau of Economic Research, Inc

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.

JEL-codes: D22 L20 O12 (search for similar items in EconPapers)
Date: 2024-10
New Economics Papers: this item is included in nep-com and nep-ind
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