Production and Ownership Networks

Author Name CHEN Cheng (Clemson University) / SUN Chang (University of Hong Kong) / ZHANG Hongyong (Senior Fellow, RIETI)
Creation Date/NO. June 2023 23-E-039
Research Project Empirical Studies on Crises and Issues in Global Supply Chains
Download / Links


Using data on both buyer-supplier and owner-subsidiary links between Japanese firms, we characterize the interconnection between production and ownership networks. In the cross-section, we find that the majority of the owner-subsidiary links are also buyer-supplier links, thus highlighting the role of goods or services transactions in vertical integration. In addition, we find that firms are more likely to engage with buyers/suppliers that have already been used by related parties, thereby suggesting an indirect benefit of integration. Finally, we show evidence that more capable firms are more likely to integrate buyers/suppliers conditional on the number of buyers/suppliers. As firms grow, however, they rely less on related buyers/suppliers and more on unrelated ones.