Kazunobu HAYAKAWA () (Inter-disciplinary Studies Center, Institute of Developing Economies, Japan) Fukunari KIMURA (Economic Research Institute for ASEAN and East Asia Faculty of Economics, Keio University, Japan) Toshiyuki MATSUURA (The Institute of Economic Research, Hitotsubashi University, Japan)
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The unprecedented development of production networks in East Asia has been investigated, both theoretically and empirically, employing the conceptual framework of fragmentation theory and its extensions. However, the benefits of production fragmentation at the firm level, particularly benefits deriving from different location advantages, have never been directly measured empirically. This paper presents the very first attempt, to the authors' knowledge, to empirically capture the benefits of fragmentation. Specifically, using Japanese firm-level data, we find that the larger the gap in the capital-labor ratios between fragmenting firms' home and overseas activities, the more greatly their cost efficiency improves.
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Article provided by Economic Research Institute for ASEAN and East Asia in its journal ERIA Discussion Paper Series.
Find related papers by JEL classification: F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business