How Much Do Connections between Companies and Industries Affect the Economy?
In modern manufacturing, businesses and industries are becoming more interconnected through production networks—relationships where one business uses the goods of another business. A recent Regional Economist article by Sungki Hong, Hannah G. Shell, and Qiuhan Sun looked at the nature of U.S. production networks and how they affect the economy.
In the case of the auto industry, which is highly interconnected, problems in connected firms—like Chrysler or GM—can negatively affect firms in the same industry—like Ford—by changing the supply and demand for raw materials and for finished products. As in the 2007-09 recession, an economic downturn in one industry will be felt by many connected industries and firms.