Market Formation as Transitive Closure: the Evolving Pattern of Trade in Music
Where do new markets come from? I construct a network model in which national markets are nodes and flows of recorded music between them are links and conduct a longitudinal analysis of the global pattern of trade in the period 1976 to 2010. I hypothesize that new export markets are developed through a process of transitive closure in the network of international trade. When two countries' markets experience the same social influences, it brings them close enough together for new homophilous ties to be formed. The implication is that consumption of foreign products helps, not hurts, home-market producers develop overseas markets, but only in those countries that have a history of consuming the same foreign products that were consumed in the home market. Selling in a market changes what is valued in that market, and new market formation is a consequence of having social influences in common.