Econophysics and Companies: Statistical Life and Death in Complex Business Networks

Half-title......Page 3
Title......Page 5
Copyright......Page 6
Contents......Page 7
Figures......Page 11
Tables......Page 17
About the authors......Page 18
Foreword......Page 21
Preface......Page 23
Prologue......Page 25
1.1 A scientific approach......Page 29
1.1.2 The emergence of econophysics......Page 31
1.2 Distributions and fluctuations......Page 32
1.3 Are networks complex?......Page 34
1.4 Change in the environment surrounding companies......Page 35
1.4.1 Outline of the Japanese electrical and electronics and automobile industries......Page 36
1.4.2 The electrical and electronics industry......Page 37
1.4.3 The automobile industry......Page 38
1.4.4 Industrial structures and business networks......Page 39
2.1.1 Flows and stocks......Page 42
2.1.2 Size distribution and Pareto\'s law......Page 43
2.2 Distribution of personal income......Page 49
2.2.1 Income distribution and Pareto\'s law......Page 50
2.3.1 Size distribution of companies......Page 54
2.3.2 Size of European companies......Page 56
2.3.3 A caveat: sample and true distributions......Page 58
2.4 Pareto\'s law......Page 61
2.4.1 Gini and Robin Hood......Page 63
2.4.2 Simulation: the inverse-function method......Page 67
2.4.3 Devil\'s Staircase......Page 68
2.4.4 Oligopoly and monopoly......Page 70
2.4.5 Pareto\'s 80-20 rule......Page 74
2.4.6 The fractal dimension......Page 79
2.5 Side story: `long-tail phenomena\'......Page 82
2.6 Mu=1 and phase transition......Page 84
3 Company growth as fluctuations......Page 87
3.1 Gibrat\'s law and detailed balance......Page 88
3.1.1 Growth-rate and Gibrat\'s law......Page 89
3.1.2 Data for Japanese companies......Page 92
3.1.3 Data for European companies......Page 93
3.1.4 Gibrat revisited......Page 95
3.1.5 Detailed balance......Page 97
3.1.6 Relation between Pareto\'s and Gibrat\'s laws and the detailed balance......Page 100
3.1.7 Copulas......Page 102
3.2.1 Gibrat\'s law and detailed balance......Page 106
3.2.2 Breakdown of the laws......Page 108
3.2.3 Side story: public notice of high-tax payers, and lost data in Japan......Page 109
3.3.1 Large-scale data for small and medium-sized enterprises......Page 111
3.3.2 Size dependence of growth......Page 112
3.4.1 Companies\' activity and bankruptcy......Page 115
3.4.2 Lifetime and debt at bankruptcy......Page 116
3.5.1 The production function......Page 119
3.5.2 Ridge theory for companies\' growth......Page 120
4.1 Introduction to network science......Page 127
4.2 1, 2, 3,…, 6 degrees of separation......Page 134
4.3 Networks in the economy......Page 139
4.3.1 The shareholding network......Page 141
4.3.2 The interlocking directors\' network......Page 143
4.3.3 The transaction network......Page 144
4.3.4 The innovation network......Page 146
4.4 Network indices......Page 149
4.4.1 Degree centrality......Page 150
4.4.3 Clustering coefficient......Page 151
4.4.5 Cliques......Page 153
4.5.1 Comparison of industries by using network indices......Page 154
4.5.2 Degree distribution......Page 156
4.5.3 Correlations related to degree......Page 159
4.5.4 The shareholding network and company size......Page 161
4.6.1 Change in the shareholding network......Page 164
4.6.2 Change of degree distribution......Page 167
4.6.3 Correlation between companies in networks......Page 171
Correlation between growth-rates of sales and cost......Page 172
Network dependence of the correlation between sales......Page 176
Network dependence of correlation between bankruptcy probabilities......Page 178
5.1 Gibrat\'s process......Page 180
5.2 Model of the shareholding network......Page 182
5.2.1 Reproduction of size distribution......Page 183
5.2.2 Reproduction of degree distribution......Page 184
5.2.3 Effects of nodal characteristics......Page 185
5.3 Balance sheet dynamics......Page 186
5.3.1 The basic agent model......Page 187
5.3.2 Representative agents......Page 191
5.3.3 Reduction to a multiplicative process......Page 192
5.3.4 Distribution of company sizes......Page 193
5.3.5 Synchronised bankruptcy......Page 196
5.4 Network effects on wealth distribution......Page 197
5.4.2 Network effects......Page 198
5.4.3 Clustering of wealth......Page 200
5.5.1 Autonomous companies......Page 203
5.5.2 Model of bounded rationality......Page 208
6.1.1 Valuation of companies......Page 212
6.1.2 Optimum capital structure......Page 216
6.1.3 Decision-making for business entry and exit......Page 218
6.1.4 Decision-making under a given economic trend......Page 221
6.2.1 Transaction network......Page 224
The propagation of positive economic influence......Page 225
6.2.2 The relationship of debtors and creditors......Page 226
6.2.3 The causes of bankruptcy and the link effect......Page 227
6.2.4 Magnitude of link effect......Page 228
6.2.5 The ripple effect......Page 229
6.2.6 Propagation of credit risk on the transaction network......Page 234
6.3.1 The industrial group as a business model......Page 237
6.3.2 Robustness of industrial groups......Page 242
6.3.3 Synergy in industrial groups......Page 243
6.3.4 Business information systems......Page 244
The application of business information......Page 245
The application of complex network analysis......Page 247
The application of agent simulation......Page 248
Epilogue......Page 249
References......Page 252
Index......Page 258