Community Structure of a Large-Scale Production Network in Japan

Abstract

This chapter analyzes nationwide supplier-buyer relationship data for nearly a million firms and 4 million transactions in Japan. The production network constructed by firms through their transaction relations reflects the characteristics of economic activities in Japan. For an intuitive understanding of the network structure, we first visualize the network in three-dimensional space using a spring-electrostatic model. In this model, we replace nodes (firms) and links (transaction relations) by particles with identical charges and springs. This visualization shows that the network is highly heterogeneous, with some firms being tightly connected and forming groups, between which there are much looser connections. Such industrial communities are identified here using algorithms that maximize modularity, which measures the share of links encircled by a given partition of nodes, with reference to the expected share of intra-links for corresponding random networks with the same node partitions. Since major communities thereby detected are still very heterogeneous, the detection of communities is repeated within them. The 10 largest communities and their principal sub-communities are then characterized by areal and industry sectoral attributes of firms. In addition, how closely the sub-communities are related to each other is quantified by introducing a metric of "distance" between them. Finally, the hierarchical relationship between the communities is clarified by considering directional features of the transactions.

Hierarchical Communities in Walnut Structure of Japanese Production Network

“…Both of these datasets were compiled in July 2016. (Some of the earlier studies on the production network include [6][7][8][9]). In this study, i !…”

“…In this paper, we study the structure of one of the most important networks, the production network, which is formed by firms (as nodes) and trade relationships (as links) [6][7][8][9]. In the scientific study of both the macro and the micro economy, the production network of the real economic world is a topic of high importance.…”

“…In previous studies [6,8], the modularity maximization technique [13] is used to study the community structure of the Japanese production network. However, modularity maximization cannot capture the dynamic aspects of the network.…”

Hierarchical communities in the walnut structure of the Japanese production network

“…Therefore, it is highly important to use actual network information when studying economic dynamics with either agent-based modelling/simulations or other means of systematic studies such as determining the debt-rank of an economic agent [1][2][3][4][5]. Without this information, it is difficult to apply the validity of the results to the actual economy.In this paper, we study the structure of one of the most important networks, the production network, which is formed by firms (as nodes) and trade relationships (as links) [6][7][8][9]. In the scientific study of both the macro and the micro economy, the production network of the real economic world is a topic of high importance.…”

“…Ties among the firms form a much tighter network with an overall structure that does not resemble a bow-tie. Then, we study the community structure and reveal its hierarchical nature using the Infomap method [11,12].In previous studies [6,8], the modularity maximization technique [13] is used to study the community structure of the Japanese production network. However, modularity maximization cannot capture the dynamic aspects of the network.…”