Interfirm Relationships and Business Performance

Paper studies the effect of business networks on performance of young Chinese firms

Abstract

In this paper, Cai and Szeidl (2016) organized business associations for the owner-managers of randomly selected young Chinese firms to study the effect of business networks on 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:

  1. The meetings increased firm revenue by 8.1 percent, and also signicantly increased profit, factors, inputs, the number of partners, borrowing, and a management score

  2. These effects persisted one year after the conclusion of the meetings

  3. Firms randomized to have better peers exhibited higher growth. The authors exploit additional interventions to document concrete channels

  4. Managers shared exogenous business-relevant information, particularly when they were not competitors, showing that the meetings facilitated learning from peers

  5. Managers created more business partnerships in the regular than in other one-time meetings, showing that the meetings improved supplier-client matching

  6. Firms whose managers discussed management, partners, or finance improved more in the associated domain, suggesting that the content of conversations shaped the nature of gains

This research was funded under the Private Enterprise Development in Low-Income Countries (PEDL) Programme

Citation

Cai, J. and Szeidl, A. (2016) Interfirm Relationships and Business Performance

Interfirm Relationships and Business Performance

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