The Invisible Hands of Inter-industry Links

Abstract

Summary:

This paper examines the issue of measuring the infl uence of processes, running outside a company, on its results, using the “input-output” method. For this purpose, a separation of the economic system into two subsystems without crossover was made, called “company” and “rest of economy”. When the “input-output” method was not used, three “invisible” groups of influences on the company’s results were identified and the way of measuring the direct and indirect effects was formulated. In particular, the following groups of eff ects were identified: • Eff ects in respect to inter-industry relations due to changes in the final demand for products of the “rest of the economy”; • Effects in respect to the reverse, inducted infl uence of the company’s production program on its own results through the inter-industry relations system; • Eff ects from the interdependence between the final demand for the company’s products and the rest of the economy. Conditions were specified, under which the formulation is appropriate and useful for a more in-depth analysis of the relations between the company and the rest of the economy and which a company must observe in order to use the “input-output” method effectively. An emphasis was placed on the unproductive and groundless overestimation of the impact of a company’s marketing activity on its results. The issue about quantification of direct and indirect eff ects on the company of processes, running outside of it and independently from it and its management’s decisions was examined and formulated precisely to protect the companies’ management from a similar overestimation.