Regionalization and risk

Abstract

Purpose– The purpose of this study is to examine the nature of regional macroeconomic risk by examining the trade networks formed by regional multinational enterprise (MNE) activity at the aggregate level, and exploring the subsequent implications on the vulnerability of those networks to economic shocks.Design/methodology/approach– The study draws on contemporary developments in graph theory to revisit the nature and dynamics of complex trade networks in the Southeast Asian region from 1990 to 2012.Findings– Findings indicate that the topology of the regional trade network has changed significantly in the period examined, in that it has become denser, more connected and more clustered. Analysis further indicates that disruptions to the trade network during periods of shock have exhibited decreasing levels of magnitude, pointing to greater robustness over time.Research limitations/implications– The results show that intra-regional MNE activity has the effect of reducing risk in the region. If MNEs aim to reduce their risk exposure, they must first deepen their commitment to the regional market.Originality/value– This paper enriches current understanding of the changing nature of regional risk, and represents one of the first efforts to examine international trade networks in light of recent developments in the understanding of networks beyond the conventional random graph.