Abstract
In this paper we analyze the effect of shocks in production networks. Our work is based on a rich dataset that contains information about companies from Slovenia right after the financial crisis of 2008. The processed data spans for 8 years and covers the transaction history as well as performance indicators and various metadata of the companies. We define sales shocks at different levels, and identify companies impacted by them. Next we investigate stress, the potential immediate upstream and downstream impact of a shock within the production network. We base our main findings on a matched pairs analysis of stressed companies. We find that both shock and stress are associated with reporting bankruptcy in the future and that stress foremost impacts the future sales of customers. Furthermore, we find evidence that stress not only results in performance losses but the reconfiguration of the production network as well. We show that stressed companies actively seek for new trading partners, and that these new links often share the industry of the shocked company. These results suggest that both stressed customers and suppliers react quickly to stress and adjust their trading relationships.
Highlights
Multimodal temporal links between companies result in the complex structure of today’s economy
We use the second level of this ontology, and since our analysis focuses on the production network, we remove companies related to financial services, or governmental activities resulting in 78 distinct sectors within the dataset
Our results show that companies are being shocked most prominently in 2009, which is consistent with the results of Fig. 3b, where 2009 appears to be the worst year in terms of sales indicating the burden of the 2008 financial crisis
Summary
Multimodal temporal links between companies result in the complex structure of today’s economy. Companies rely on the input and output of their trading partners These linkages between suppliers and customers form the production network. The network consists of nodes (companies) with directed edges that define supplier and customer relations. Due to unforeseen events companies experience shocks, and may be unable to fulfill their liabilities to others, and impose stress on their upstream supplier and downstream customer partners. The effect of these individual company-level shocks [1, 2] in the ever-changing production network is still not completely understood
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