Interfirm Relationships and Business Performance

46 Pages Posted: 3 Jan 2017

See all articles by Jing Cai

Jing Cai

University of Michigan at Ann Arbor

Adam Szeidl

Central European University

Multiple version iconThere are 3 versions of this paper

Date Written: December 2016

Abstract

We organized business associations for the owner-managers of randomly selected young Chinese firms to study the effect of business networks on firm performance. We randomized 2,800 firms into small groups whose managers held monthly meetings for one year, and into a "no-meetings" control group. We find that: (1) The meetings increased firm revenue by 8.1 percent, and also significantly increased profit, factors, inputs, the number of partners, borrowing, and a management score; (2) These effects persisted one year after the conclusion of the meetings; and (3) Firms randomized to have better peers exhibited higher growth. We exploit additional interventions to document concrete channels. (4) Managers shared exogenous business-relevant information, particularly when they were not competitors, showing that the meetings facilitated learning from peers. (5) Managers created more business partnerships in the regular than in other one-time meetings, showing that the meetings improved supplier-client matching. (6) Firms whose managers discussed management, partners, or finance improved more in the associated domain, suggesting that the content of conversations shaped the nature of gains.

Keywords: business networks, field experiment, information diffusion, meetings, peer effects, referrals, Trust

JEL Classification: D22, L14, O12, O14

Suggested Citation

Cai, Jing and Szeidl, Adam, Interfirm Relationships and Business Performance (December 2016). CEPR Discussion Paper No. DP11717, Available at SSRN: https://ssrn.com/abstract=2893070

Jing Cai (Contact Author)

University of Michigan at Ann Arbor ( email )

500 S. State Street
Ann Arbor, MI 48109
United States

Adam Szeidl

Central European University ( email )

Nador u. 9.
Budapest H-1051
Hungary
+36 1 327 3000 (Phone)
+36 1 327 3232 (Fax)

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