Disruption of international trade and its propagation through firm-level domestic supply chains: A case of Japan.

This study simulates how the disruption of imports from various regions affects the total production of the importer economy. We particularly incorporate the propagation of the economic effect through domestic supply chains using data on more than one million firms and four million supply chain ties in Japan. Our findings are summarized as follows. First, the negative effect of the disruption of intermediate imports grows exponentially as its duration and strength increase due to downstream propagation. Second, the propagation of the economic effect is substantially affected by the network topology of importers, such as the number of importers (affected nodes) and their degree of upstreamness in supply chains, whereas the effect of their degree centrality is heterogeneous depending on their degree of upstreamness. Finally, the negative effect of import disruption can be mitigated by the reorganization of domestic supply chains, even when conducted only among network neighbors. Our findings provide important policy and managerial implications for the achievement of more robust and resilient global supply chains.

Simulation of supply chain disruptions considering establishments and power outages.

In this paper, we simulate the economic loss resulting from supply chain disruptions triggered by the Great East Japan Earthquake (GEJE) in 2011, applying data from firm-level supply chains and establishment-level attributes to an agent-based model. To enhance the accuracy of the simulation, we extend data and models in previous studies in four ways. First, we identify the damage to production facilities in the disaster-hit regions more accurately by using establishment-level census and survey data and geographic information system (GIS) data on the damages caused by the GEJE and subsequent tsunami. Second, the use of establishment-level data enables us to capture supply chains between non-headquarter establishments in disaster-hit regions and establishments in other regions. Third, we incorporate the effect of power outages after the GEJE on production reduction, which exacerbated the effect of the supply chain disruption, particularly in the weeks immediately after the GEJE. Finally, our model incorporates sectoral heterogeneity by employing sector-specific parameters. Our findings indicate that the extended method can significantly improve the accuracy of predicting the domestic production after the GEJE, particularly due to the first three improvements utilizing various data sources, not because of the use of more sector-specific parameters. Our method can be applied to predict the economic effect of future disasters, such as the Nankai Trough earthquake, on each region more precisely.

Has Covid-19 permanently changed online purchasing behavior?

This study examines how the COVID-19 pandemic has affected online purchasing behavior using data from a major online shopping platform in Japan. We focus on the effect of two measures of the pandemic, i.e., the number of positive COVID-19 cases and state declarations of emergency to mitigate the pandemic. We find that both measures promoted online purchases at the beginning of the pandemic, but in later periods, their effect faded. In addition, online purchases returned to normal after states of emergency ended, and the overall time trend in online purchases excluding the effects of the two measures was stable during the first two years of the pandemic. These results suggest that the effect of the pandemic on online purchasing behavior is temporary and will not persist after the pandemic. Supplementary Information: The online version contains supplementary material available at 10.1140/epjds/s13688-022-00375-1.

Robustness and resilience of supply chains during the COVID-19 pandemic.

Using a unique firm-level data set from Asia, this study examines what determined the robustness and resilience of supply chain links, that is, the ability of maintaining links and recovering disrupted links by substitution, respectively, when firms faced economic shocks due to the spread of the coronavirus disease (COVID-19). We find that a supply chain link was likely to be robust if the link was between a foreign-owned firm and a firm located in the foreign-owned firm's home country, implying that homophily on a certain dimension generates strong ties and thus supply chain robustness. We also find that firms with geographic diversity of customers and suppliers tended to increase their transaction volume with one partner while decreasing the volume with others. This evidence shows that firms with diversified customers and suppliers are resilient, mitigating the damage from supply chain disruption through the substitution of partners. Furthermore, the robustness and resilience of supply chains are found to have led to higher performance.

Do economic effects of the anti-COVID-19 lockdowns in different regions interact through supply chains?

To prevent the spread of COVID-19, many cities, states, and countries have 'locked down', restricting economic activities in non-essential sectors. Such lockdowns have substantially shrunk production in most countries. This study examines how the economic effects of lockdowns in different regions interact through supply chains, which are a network of firms for production, by simulating an agent-based model of production using supply-chain data for 1.6 million firms in Japan. We further investigate how the complex network structure affects the interactions between lockdown regions, emphasising the role of upstreamness and loops by decomposing supply-chain flows into potential and circular flow components. We find that a region's upstreamness, intensity of loops, and supplier substitutability in supply chains with other regions largely determine the economic effect of the lockdown in the region. In particular, when a region lifts its lockdown, its economic recovery substantially varies depending on whether it lifts the lockdown alone or together with another region closely linked through supply chains. These results indicate that the economic effect produced by exogenous shocks in a region can affect other regions and therefore this study proposes the need for inter-region policy coordination to reduce economic loss due to lockdowns.

The propagation of economic impacts through supply chains: The case of a mega-city lockdown to prevent the spread of COVID-19.

This study quantifies the economic effect of a possible lockdown of Tokyo to prevent the spread of COVID-19. The negative effect of such a lockdown may propagate to other regions through supply chains because of supply and demand shortages. Applying an agent-based model to the actual supply chains of nearly 1.6 million firms in Japan, we simulate what would happen to production activities outside Tokyo if production activities that are not essential to citizens' survival in Tokyo were shut down for a certain period. We find that if Tokyo were locked down for a month, the indirect effect on other regions would be twice as large as the direct effect on Tokyo, leading to a total production loss of 27 trillion yen in Japan or 5.2% of the country's annual GDP. Although the production that would be shut down in Tokyo accounts for 21% of the total production in Japan, the lockdown would result in an 86% reduction of the daily production in Japan after one month.

Propagation of negative shocks across nation-wide firm networks.

This study examines how negative shocks due to, for example, natural disasters propagate through supply chains. We apply a simulation technique to actual supply chain data covering most Japanese firms. To investigate the property of the propagation in the network, we test different types of artificial negative shocks. We find that, first, network structures severely affect the speed of propagation in the short run, and the total loss in the long run. The scale-free nature of the actual supply-chain network-that is, the power-law degree distribution-leads to faster propagation. Second, more intensive damages-that is, more damages suffered by fewer firms-result in faster propagation than extensive damages of the same total size. Third, the actual supply-chain network has innate robustness that comes from substitutability of supplies. If the supply-chain network has severe substitutability, the propagation of negative shocks becomes substantially large. Fourth, direct damages in urban regions promote faster propagation than those in rural regions. Fifth, different sectoral damages show significant differences in the speed of propagation. Finally, we check the indirect damage triggered by a single firm's loss: 9.7% of all firms contribute to significant loss, and this loss accounts for more than 10% of the damage to the entire production. The simulations conspicuously show that different direct damages, even if they have the same total magnitude of damages, can generate considerably different damages because of the structure of the supply-chain network.

Assortativity and mixing patterns in international supply chain networks.

As economic globalisation increases, inclination toward domestic protectionism is also increasing in many countries of the world. To improve the productivity and the resilience of national economies, it is important to understand the drivers and the barriers of the internatiolisation of economic activities. While internatiolisation of individual economic actors is difficult to explain using traditional theories, aggregate patterns may be explained to some extent. We take a network-centric perspective to describe the extent of corporate internatiolisation in different countries. Based on Newman's assortativity coefficient, we design a range of assortativity metrics which are appropriate in the firm network context. Using these, we quantify companies' appetite for internatiolisation in relation to the internatiolisation of their partners. We use the Factset Revere dataset, which is provided by FactSet Research Systems Inc., that captures global supply chain relationships between companies. We identify countries where the level of internationalisation is relatively high or relatively low, and we show that subtle differences in the assortativity metrics used change the ranking of countries significantly in terms of the assortativity correlation, highlighting that companies in different countries are prone to different types of internationalisation. Overall, we demonstrate that firms from most countries in the dataset studied have a slight preference to make supply chain relationships with other firms which have undergone a similar level of internationalisation, and other firms from their own country. The implications of our results are important for countries to understand the evolution of international relationships in their corporate environments, and how they compare to other nations in the world in this regard.

Analyzing the coevolution of interorganizational networks and organizational performance: Automakers' production networks in Japan.

Organizations create networks with one another, and these networks may in turn shape the organizations involved. Until recently, such complex dynamic processes could not be rigorously empirically analyzed because of a lack of suitable modeling and validation methods. Using stochastic actor-oriented models and unique longitudinal survey data on the changing structure of interfirm production networks in the automotive industry in Japan, this paper illustrates how to quantitatively assess and validate (1) the dynamic micro-mechanism by which organizations form their networks and (2) the role of the dynamic network structures in organizational performance. The applied model helps to explain the endogenous processes behind the recent diversification of Japanese automobile production networks. Specifically, testing the effects of network topology and network diffusion on organizational performance, the novel modeling framework enables us to discern that the restructuring of interorganizational networks led to the increase of Japanese automakers' production per employee, and not the reverse. Traditional models that do not allow for interaction between interorganizational structure and organizational agency misrepresent this mechanism.

The impact of a shade coffee certification program on forest conservation: a case study from a wild coffee forest in Ethiopia.

In recent years, shade coffee certification programs have attracted increasing attention from conservation and development organizations. Certification programs offer an opportunity to link environmental and economic goals by providing a premium price to producers and thereby contributing to forest conservation. However, the significance of the conservation efforts of certification programs remains unclear because of a lack of empirical evidence. The purpose of this study was to examine the impact of a shade coffee certification program on forest conservation. The study was conducted in the Belete-Gera Regional Forest Priority Area in Ethiopia, and remote sensing data of 2005 and 2010 were used to gauge the change of forest area. Using propensity score matching estimation, we found that forests under the coffee certification program were less likely to be deforested than forests without forest coffee. By contrast, the difference in the degree of deforestation between forests with forest coffee but not under the certification program and forests with no forest coffee is statistically insignificant. These results suggest that the certification program has had a large effect on forest protection, decreasing the probability of deforestation by 1.7 percentage points.

Impact of community-based forest management on forest protection: evidence from an aid-funded project in Ethiopia.

Many African countries have adopted community-based forest management (CBFM) to prevent deforestation. However, empirical studies have not reached a consensus on the effectiveness of CBFM. The purpose of this study is to examine the impact of the establishment of participatory forest management associations in Ethiopia. We used remote sensing data to gauge the change in forest area and employed a two-stage least squares model to correct for possible biases. The results indicate that the forest area managed by forest associations declines more in the year of establishment than forest areas with no association. This finding suggests that villagers may engage in "last-minute" logging. However, 1 year after the establishment of the forest associations, the forest area of the associations increased substantially, most likely because the associations monitor illegal logging, enabling the regeneration of open areas within the registered forest area. On average, the forest area of the forest associations increased by 1.5 % in the first 2 years, whereas forest areas not managed as part of an association declined by 3.3 %. The cumulative impact over 2 years yields a net increase in the rate of change of 4.8 %. These results demonstrate that it is important to improve the monitoring of forest areas during the initial establishment of participatory forest management associations to maximize the effects of association establishment.