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

Giulio Cainelli, Sandro Montresor () and Giuseppe Vittucci Marzetti

No 1018, Openloc Working Papers from Public policies and local development

Abstract: The paper analyzes how (production and financial) inter-firm networks can affect firms' default probabilities and observed default rates: an issue the recent crisis has brought to the front of the debate. A simple theoretical model of shock transfer is built up to investigate some stylized facts on how firm-idiosyncratic shocks tend to be allocated in the network, and how this allocation changes firms' default probability. The model shows that the network works as a perfect "risk-pooling" mechanism, when it is both strongly connected and symmetric. But the resort to "risk-sharing" does not necessarily reduce default rates in the network, unless the shock they 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" financial crises such as the current one.

Keywords: Firm clusters; industrial districts; interlinking transactions; resilience; systemic risk (search for similar items in EconPapers)
JEL-codes: G20 R11 R12 (search for similar items in EconPapers)
Date: 2010
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Citations: View citations in EconPapers (1)

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Related works:
Chapter: Production and financial linkages in inter-firm networks: structural variety, risk-sharing and resilience (2013)
Journal Article: Production and financial linkages in inter-firm networks: structural variety, risk-sharing and resilience (2012)
Working Paper: Production and financial linkages in inter-firm networks: structural variety, risk-sharing and resilience (2010)
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Persistent link: https://EconPapers.repec.org/RePEc:trn:utwpol:1018

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