Relationship between the Business Relationship Networks and Size of Firms

ABSTRACT

The establishment of inter-business relationships is important to business growth, but what is the relationship between the two? Using a large-scale business relationship database (800,000 firms including SMEs), the network structure of firms’ business relationships and the relationship between the number of firms’ business relationships and firm size were analyzed. The important findings as are follows. 1. The distribution of the number of firms’ business relationships nearly takes the shape of power distribution, and has an oligopolistic structure where a handful of firms command many of the business relationships. 2. Identifying firms with many business relationships (hub firms) and observing networks among these hub firms shows that the distribution of the number of firms’ business relationships nearly takes the shape of power distribution, and hub firms among hub firms (“super hub firms”) exist. 3. The larger the firm the more its business relationships increase, and overall the two are in a linear relationship. However, regarding firms with many business relationships, it was recognized that the larger the scale the less the business relationships are increased. This is because companies are cutting back on the costs of maintaining these relationships.