The Structure of Supplier Network and Firm’s Performance: The Case of Korean Manufacturing Industries

Objectives: The purpose of this paper is to investigate the relationship between the structure of supplier network and firm’s performance in Korean manufacturing industries. Methods/Statistical Analysis: The standard method of network analysis as well as the regressionanalysis wasapplied to a unique dataset that contains information on buyer and supplier linkages for more than 20,000 incorporated manufacturing firms. Findings: Firstly, the characteristics of the network structure is different for industries; both hierarchy and openness are relatively high in metal and metal products, both are relatively low in textile and apparel, hierarchy is high but openness is low in automobile and electronic devices, hierarchy is low but openness is high in food and beverage. Secondly, both the productivity, measured by total factor productivity, and the profitability, measured by the operating income to sales, of the firms involved in the supplier network are higher than those of the firms not involved, and increase sequentially as the order numbers of tier of the firm increase in supply chain. Thirdly, the sales concentration ratio, representing for the openness of the network, has a significant positive effect on the productivity, and no significant effect on the operating income to sales. Improvements/Applications: One of the most important policy implications is that regulations against the inter-firm transaction should take different forms according to the transactional characteristics of the industries.