The authors organized business associations for the owner-managers of randomly selected young Chinese firms to study the effect of business networks on firm performance. They randomized 2,800 firms into small groups whose managers held monthly meetings for one year, and into a “no-meetings” control group. They find that:
The meetings increased firm revenue by 8.1 percent, and also signi ficantly increased profi t, factors, inputs, the number of partners, borrowing, and a management score;
These effects persisted one year after the conclusion of the meetings; and
Firms randomized to have better peers exhibited higher growth. The authors exploit additional interventions to document concrete channels.
Managers shared exogenous business-relevant information, particularly when they were not competitors, showing that the meetings facilitated learning from peers.
Managers created more business partnerships in the regular than in other one-time meetings, showing that the meetings improved supplier-client matching.
This research was funded under the Private Enterprise Development in Low-Income Countries (PEDL) Programme
Cai, J. and Szeidl, A. (2017) “Interfirm Relationships and Business Performance”, The Quarterly Journal of Economics.
Interfirm Relationships and Business Performance