Do Larger Firms Have More Interfirm Relationships?
In this study, we investigate interfirm networks by employing a unique dataset containing information on more than 800,000 Japanese firms, about half of all corporate firms currently operating in Japan. First, we find that the number of relationships, measured by the indegree, has a fat tail distribution, implying that there exist “hub” firms with a large number of relationships. Moreover, the indegree distribution for those hub firms also exhibits a fat tail, suggesting the existence of “super-hub” firms. Second, we find that larger firms tend to have more counterparts, but the relationship between firms’ size and the number of their counterparts is not necessarily proportional; firms that already have a large number of counterparts tend to grow without proportionately expanding it.
When examining interfirm networks, it comes as little surprise to find that larger firms tend to have more interfirm relatioships than smaller firms. For example, Toyota purchases intermediate products and raw materials from a large number of firms, located inside and outside the country, and sells final products to a large number of customers; it has close relationships with numerous commercial and investment banks; it also has a large number of affiliated firms. Somewhat surprisingly, however, we do not know much about the statistical relationship between the size of a firm and the number of its relationships. The main purpose of this paper is to take a closer look at the linkage between the two variables.