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Modularity and the organization of international production

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  • Van Assche, Ari
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    Abstract

    In recent decades, the global electronics industry has experienced a large reorganization. U.S. electronics firms have on a large scale off-shored and outsourced their manufacturing activities. Japanese electronics firms have offshored a large portion of their manufacturing, but have remained vertically integrated. To account for these industry trends, we build an two-country industry-equilibrium model in which firms concurrently choose (i) a product architecture, (ii) an ownership structure and (iii) a location for production. We demonstrate that technological advances that allow firms to more easily modularize their products can explain the co-evolving trends of offshoring and outsourcing. We also assess the role of technology on the different patterns of reorganization between Japanese and U.S. firms.

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    Bibliographic Info

    Article provided by Elsevier in its journal Japan and the World Economy.

    Volume (Year): 20 (2008)
    Issue (Month): 3 (August)
    Pages: 353-368

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    Handle: RePEc:eee:japwor:v:20:y:2008:i:3:p:353-368

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    Web page: http://www.elsevier.com/locate/inca/505557

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    References

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    1. Elhanan Helpman, 2006. "Trade, FDI, and the Organization of Firms," Harvard Institute of Economic Research Working Papers 2118, Harvard - Institute of Economic Research.
    2. Galina A. Schwartz & Ari Van Assche, 2006. "Input Specificity and Global Sourcing," CIRANO Working Papers 2006s-02, CIRANO.
    3. Carl Bonham & Byron Gangnes & Ari Van Assche, 2007. "Fragmentation and East Asia's information technology trade," Applied Economics, Taylor & Francis Journals, vol. 39(2), pages 215-228.
    4. Dixit, Avinash K & Stiglitz, Joseph E, 1975. "Monopolistic Competition and Optimum Product Diversity," The Warwick Economics Research Paper Series (TWERPS) 64, University of Warwick, Department of Economics.
    5. Antràs, Pol & Helpman, Elhanan, 2004. "Global Sourcing," CEPR Discussion Papers 4170, C.E.P.R. Discussion Papers.
    6. Ulrich, Karl, 1995. "The role of product architecture in the manufacturing firm," Research Policy, Elsevier, vol. 24(3), pages 419-440, May.
    7. Barbara J. Spencer, 2005. "International Outsourcing and Incomplete Contracts," NBER Working Papers 11418, National Bureau of Economic Research, Inc.
    8. Gene M. Grossman & Elhanan Helpman, 2002. "Integration Versus Outsourcing In Industry Equilibrium," The Quarterly Journal of Economics, MIT Press, vol. 117(1), pages 85-120, February.
    9. Helpman, Elhanan & Antras, Pol, 2004. "Global Sourcing," Scholarly Articles 4784029, Harvard University Department of Economics.
    10. Timothy J. Sturgeon, 2002. "Modular production networks: a new American model of industrial organization," Industrial and Corporate Change, Oxford University Press, vol. 11(3), pages 451-496, June.
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    Cited by:
    1. Fu, Wenying & Revilla Diez, Javier & Schiller, Daniel, 2013. "Interactive learning, informal networks and innovation: Evidence from electronics firm survey in the Pearl River Delta, China," Research Policy, Elsevier, vol. 42(3), pages 635-646.
    2. Kiyoyasu Tanaka, 2009. "Vertical Foreign Direct Investment: Evidence from Japanese and U.S. Multinational Enterprises," Global COE Hi-Stat Discussion Paper Series gd08-046, Institute of Economic Research, Hitotsubashi University.
    3. Byron Ganges & Ari Van Assche, 2010. "Global Production Networks in Electronics and Intra-Asian Trade," Working Papers 2010-04, University of Hawaii Economic Research Organization, University of Hawaii at Manoa.

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