Maison des Sciences Humaines
11, Porte des Sciences
L-4366 Esch-sur-Alzette / Belval
seminars@liser.lu
Abstract
We characterize each firm’s web of social connections to other firms using data on directors and their family ties for all incorporated firms in the Swedish economy. We show that, at the aggregate level, director networks are linked to input-output tables and cross-industry patterns of job-to-job mobility. We hypothesize that these networks help small firms accommodate positive and negative shocks through reallocation of labor across the connected firms. Thus, director networks can provide small firms with some of the flexibility that is inherent to large firms. In support of this hypothesis, we first show that labor flows between newly connected firms increase precisely at the time a connection is established. These results closely resemble patterns we observe during the formation of formal business groups. We provide several empirical tests to discern if the flows are a part of an efficient exchange and show how the networks help the firms manage idiosyncratic shocks. Authors: Carlsson M, Gorschkov A Kramarz F and ON Skans.