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Structure and Characteristics of Transaction Network in Korean Non-Financial Industries

Affiliations

  • Department of Business Administration, Pukyong Nat’l University, Korea
  • School of Economics and Trade, Kyungpook Nat’l University, Korea

Abstract


Background/Objectives: This paper investigates the structural similarities and differences of supplier networks for 9 industries for Korea on the basis of social network analysis. Methods/Statistical Analysis: There are well known two types of network- small world network, scale free network. We checked the key characteristics-likes in/out degrees and path length and other indexes related with the connectivity- to identify types for the 9 industries using a unique dataset that contains information on buyer and supplier linkages for more than 80,000 incorporated non-financial firms. Findings: Common characteristics for scale free networks are the degrees of nodes in the networks, which are the sales and purchasing transaction numbers for the firms in the industrial networks. They fit the power law, the key characteristic of scale free network for all 9 industries. The error tolerances of networks upon the hub removal are very weak for all 9 industries. This is another characteristic of scale free network. But the hub influences and the degrees of connections via hubs vary with industries. The networks of the assembly and processing industries such as automobile, electronics, and shipbuilding have strongest hub influence and firms in the networks are connected strongest via hub. This is also identified in the shortest average path lengths and weakest tolerance for hubs in these industries. Consumer goods industries such as food and fabrics and the industry of basic materials have longest average path length and strongest tolerance for hubs so that these industries show weakest hub influences. Service industries are in the position of middle. These hub influences are also reflected in the path length and outbound degree’s relations with sales volumes. Application/Improvements: The industrial policy should adapt to different network characteristics. For example, the industrial network will be more hierarchical as the network has more characteristics of scale free network. Policies should consider this.

Keywords

Inter-Firm Transaction Network, Scale Free Network, Social Network Analysis, Supplier Chain

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