NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH
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Glenn C.G. Magerman

ECARES
Université libre de Bruxelles
Avenue F.D. Roosevelt 42
1050 Brussels
Belgium

E-Mail: glenn.magerman@ulb.ac.be
Institutional Affiliation: Université libre de Bruxelles

NBER Working Papers and Publications

January 2019The Origins of Firm Heterogeneity: A Production Network Approach
with Andrew B. Bernard, Emmanuel Dhyne, Kalina Manova, Andreas Moxnes: w25441
This paper quantifies the origins of firm size heterogeneity when firms are interconnected in a production network. Using the universe of buyer-supplier relationships in Belgium, the paper develops a set of stylized facts that motivate a model in which firms buy inputs from upstream suppliers and sell to downstream buyers and final demand. Larger firm size can come from high production capability, more or better buyers and suppliers, and/or better matches between buyers and suppliers. Downstream factors explain the vast majority of firm size heterogeneity. Firms with higher production capability have greater market shares among their customers, but also higher input costs and fewer customers. As a result, high production capability firms have lower sales unconditionally and higher sales co...
 
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