The Organization of Global Supply Networks

Fattorini, Loredana and Rungi, Armando and Zhu, Zhen The Organization of Global Supply Networks. EIC working paper series #8/2017 IMT School for Advanced Studies Lucca ISSN 2279-6894.

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Abstract

In this contribution, we introduce a network approach for the organization of global production across national borders, beyond the sequential industry-level metrics proposed in the previous literature. First, we show and argue that several characteristics of global production processes would be lost in the analysis when assuming that they could be proxied as linear sequences. Hence, we propose an index that assesses the relevance of any input for the target output, including its role as an input of inputs. Thereafter, we exploit an own-built firm-level dataset of about 20,489 U.S. parent companies integrating more than 154,000 affiliates worldwide. Results show that the technological relevance of an input in a directed supply network is also a good predictor for: i) the probability that an input industry is actually integrated within a firm boundary; ii) the number of affiliates that are controlled by the parent company and active in that input industry.

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