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Production and financial linkages in inter-firm networks: structural variety, risk-sharing and resilience
Journal of Evolutionary Economics (2012)
  • Sandro Montresor, University of Bologna
  • Giulio Cainelli, University of Padua
  • Giuseppe Vittucci Marzetti
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.

Publication Date
2012
Citation Information
Sandro Montresor, Giulio Cainelli and Giuseppe Vittucci Marzetti. "Production and financial linkages in inter-firm networks: structural variety, risk-sharing and resilience" Journal of Evolutionary Economics (2012)
Available at: http://works.bepress.com/sandro_montresor/2/