Before revision:  Using a unique data set covering 10 years of interfirm buyer--seller networks and structural equation modeling, we show that the evolution of the interfirm buyer--seller network is a result of a firm's myopic decisions to avoid other firms ' negative shocks and share their positive shocks. We show that the current network is often the best network configuration, which improves both the propagation of positive shocks and the avoidance of negative shocks compared with previous networks. Furthermore, we show that for positive shocks, the future network is often better than the current network in the sense that it propagates positive shocks better than the current network. This is explained by the asymmetry in cost between severing a link and link formation.
After revision:  Using a unique data set covering 10 years of interfirm buyer--seller networks and structural equation modeling, we show that the evolution of the interfirm buyer--seller network is a result of a firm's local decisions to mitigate adverse effects from neighbor firms through interfirm linkage, while enjoying positive effects from them. As a result, link renewal tends to have a positive impact on the growth rates of firms.