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Openness and Industrial Responses in a Wal-Mart World: A Case Study of Mexican Soaps, Detergents and Surfactant Producers

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  • Beata Smarzynska Javorcik
  • Wolfgang Keller
  • James R. Tybout

Abstract

This paper uses a case study approach to explore the effects of NAFTA and GATT membership on innovation and trade in the Mexican soaps, detergents and surfactants (SDS) industry. Several basic findings emerge. First, the most fundamental effect of NAFTA and the GATT on the SDS industry was to help induce Wal-Mart to enter Mexico. Once there, Walmex fundamentally changed the retail sector, forcing SDS firms to cut their profit margins and/or innovate. Those unable to respond to this new environment tended to lose market share and, in some cases, disappear altogether. Second, partly in response to Walmex, many Mexican producers logged impressive efficiency gains during the previous decade. These gains came both from labor-shedding and from innovation, which in turn was fueled by innovative input suppliers and by multinationals bringing new products and processes from their headquarters to Mexico. Finally, although Mexican detergent exports captured an increasing share of the U.S. detergent market over the past decade, Mexican sales in the U.S. were inhibited by a combination of excessive shipping delays at the border and artificially high input prices (due to Mexican protection of domestic caustic soda suppliers). They were also held back by the major re-tooling costs that Mexican producers would have had to incur in order to establish brand recognition among non-Latin consumers, and in order to comply with zero phosphate laws in many regions of the United States.

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Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 12457.

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Date of creation: Aug 2006
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Handle: RePEc:nbr:nberwo:12457

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  1. Sanghamitra Das & Mark J. Roberts & James R. Tybout, 2001. "Market Entry Costs, Producer Heterogeneity, and Export Dynamics," NBER Working Papers 8629, National Bureau of Economic Research, Inc.
  2. Alfredo Cuevas & Miguel Messmacher & Alejandro Werner, 2005. "Foreign Direct Investment in Mexico since the Approval of," World Bank Economic Review, World Bank Group, vol. 19(3), pages 473-488.
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Cited by:
  1. Arnold, Jens & Javorcik, Beata S. & Mattoo, Aaditya, 2007. "Does services liberalization benefit manufacturing firms ? Evidence from the Czech Republic," Policy Research Working Paper Series 4109, The World Bank.
  2. Beata Javorcik & Yue Li, 2013. "Do the Biggest Aisles Serve a Brighter Future? Global Retail Chains and Their Implications for Romania," Economics Series Working Papers 637, University of Oxford, Department of Economics.
  3. Carluccio, Juan & Fally, Thibault, 2013. "Foreign entry and spillovers with technological incompatibilities in the supply chain," Journal of International Economics, Elsevier, vol. 90(1), pages 123-135.
  4. Horst Raff & Nicolas Schmitt, 2008. "Buyer Power in International Markets," Kiel Working Papers 1431, Kiel Institute for the World Economy.
  5. Cédric Durand, 2009. "Wal-Mart en México, una trajectoria exitosa y sus causas," Post-Print hal-00522525, HAL.
  6. Emek Basker, 2006. "The Causes and Consequences of Wal-Mart's Growth," Working Papers 0611, Department of Economics, University of Missouri.
  7. Horst Raff & Nicolas Schmitt, 2009. "Imports, Pass-Through, and the Structure of Retail Markets," Kiel Working Papers 1556, Kiel Institute for the World Economy.
  8. Brock, Gregory & German-Soto, Vicente, 2013. "Regional industrial growth in Mexico: Do human capital and infrastructure matter?," Journal of Policy Modeling, Elsevier, vol. 35(2), pages 228-242.
  9. Kaditi, Eleni A., 2011. "Market Dynamics in Supply Chains: The Impact of Globalisation and Consolidation on Food Companies' Mark-Ups," 2011 International Congress, August 30-September 2, 2011, Zurich, Switzerland 114452, European Association of Agricultural Economists.
  10. Igan, Deniz & Suzuki, Junichi, 2012. "The “Wal-Mart effect” in central and eastern Europe," Journal of Comparative Economics, Elsevier, vol. 40(2), pages 194-210.
  11. Eleni A Kaditi, 2011. "Market Dynamics in Supply Chains: The Impact of Globalisation and Consolidation on Food Companie's Mark-ups," Working Papers id:4430, eSocialSciences.
  12. Silva, Peri, 2011. "The role of importers and exporters in the determination of the U.S. tariff preferences granted to Latin America," Journal of Development Economics, Elsevier, vol. 94(2), pages 207-219, March.
  13. Godart, Olivier N. & Görg, Holger, 2013. "Suppliers of multinationals and the forced linkage effect: Evidence from firm level data," Journal of Economic Behavior & Organization, Elsevier, vol. 94(C), pages 393-404.

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