Revealing production networks from firm growth dynamics

2023/02/20 by Luca Mungo, Mungo, Luca, José Alberto Moráis Morán +1
Economics, Econometrics and Finance · #FOS: Economics and business #Firm Innovation and Growth #Statistical Finance (q-fin.ST)

paper · pdf · doi:10.48550/arxiv.2302.09906

openalex publication_date 2023/02/20 · openalex created_date 2025/10/10 · openalex updated_date 2026/07/28

Abstract

We study the correlation structure of firm growth rates. We show that most firms are correlated because of their exposure to a common factor but that firms linked through the supply chain exhibit a stronger correlation on average than firms that are not. Removing this common factor significantly reduces the average correlation between two firms with no relationship in the supply chain while maintaining a significant correlation between two firms that are linked. We then investigate if this observation can be used to reconstruct the topology of a supply chain network using Gaussian Markov Models.

Related

• Correlated Growth of Causal Networks
• The Formation of Production Networks: How Supply Chains Arise from Simple Learning with Minimal Information
• The gradual evolution of buyer--seller networks and their role in aggregate fluctuations
• Topology-dependence of propagation mechanisms in the production network
• Supply chain network rewiring dynamics at the firm-level