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Modularity and the organization of international production

  • Van Assche, Ari
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    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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    File URL: http://www.sciencedirect.com/science/article/B6VF1-4MSHY1M-1/1/0d0a8f43dcfb8215ce43c10a07879efa
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    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
    Contact details of provider: Web page: http://www.elsevier.com/locate/inca/505557

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    1. Antràs, Pol & Helpman, Elhanan, 2004. "Global Sourcing," CEPR Discussion Papers 4170, C.E.P.R. Discussion Papers.
    2. Galina A. Schwartz & Ari Van Assche, 2006. "Input Specificity and Global Sourcing," CIRANO Working Papers 2006s-02, CIRANO.
    3. Helpman, Elhanan, 2006. "Trade, FDI and the Organization of Firms," CEPR Discussion Papers 5589, C.E.P.R. Discussion Papers.
    4. Ulrich, Karl, 1995. "The role of product architecture in the manufacturing firm," Research Policy, Elsevier, vol. 24(3), pages 419-440, May.
    5. Barbara J. Spencer, 2005. "International Outsourcing and Incomplete Contracts," NBER Working Papers 11418, National Bureau of Economic Research, Inc.
    6. Carl Bonham & Byron Gangnes & Ari Van Assche, 2004. "Fragmentation and East Asia’s Information Technology Trade," Working Papers 200409, University of Hawaii at Manoa, Department of Economics.
    7. 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.
    8. 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.
    9. Dixit, Avinash K & Stiglitz, Joseph E, 1977. "Monopolistic Competition and Optimum Product Diversity," American Economic Review, American Economic Association, vol. 67(3), pages 297-308, June.
    10. repec:hrv:faseco:4784029 is not listed on IDEAS
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