Production networks and industrial growth: interconnectedness as the cornerstone of the economy

Molnar, Eszter and Csala, Denes (2024) Production networks and industrial growth: interconnectedness as the cornerstone of the economy. PhD thesis, Lancaster University.

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Abstract

This thesis delves into the application of network science in economic sciences , focusing on inter-industry production networks , offering a new perspective on how economic interdependencies can be analysed. The first empirical chapter starts with the study’s theoretical background, discusses the application of network science to understand complex questions within production networks, and introduces the threshold problem. After constructing the 2007 and 2012 US national production network using data from the Bureau of Economic Analysis Input-Output Accounts, it looks at the sensitivity of the interactions in the network topology and central industries to different threshold values, highlighting the importance of these thresholds in shaping the network. Secondly, the thesis examines the relationship between national production network characteristics and industrial growth. It introduces a network-based growth model based on the national production network and provides results that reveal that these characteristics can account for up to 29% of growth variance. This outcome highlights the potential of national production network metrics as explanatory variables in understanding industrial growth. After, the focus shifts to industry-specific analysis, specifically the storage battery industry and its supply chain. It introduces the concept of the ego network , discusses the challenges and relationships within this industry and explores the storage battery ego network. It analyses separately the simple upstream and downstream ego network and also the advanced ego network at the industry and network level. It identifies the indispensable industries (referring to them as integrator, allocator, and mediator industries) within the ego network, shedding light on supply chain dynamics and their role in ensuring resilience . The last part continues with the industry-specific perspective and examines the role of the storage battery ego network in industrial growth. It finds that 51% of an industry’s success is linked to its position within the ego network. In summary, this thesis advances the understanding of the intricate relationship inside production networks and emphasises the critical role of threshold values, the impact of network characteristics on growth, and the significance of industry-specific ego production networks.