The emergence of properties of the Japanese production network: How do listed firms choose their partners?

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This paper investigates the mechanisms behind the formation of links between suppliers and customers in the Tokyo Stock Exchange (TSE) production network. The supplier-customer network of listed firms in Japan is estimated by the so-called exponential random graph model (ERGM). We estimate 4 models to understand how endogenous and exogenous attributes contribute to the emergence of the TSE production network. In terms of endogenous attributes, the probability of links between suppliers and customers increases with the transitivity and reciprocity. We show that the model fits the real data only when the geographic distance, firm sizes the industrial sector of the firms are considered.