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Fragmentation in the automobile manufacturing industry: evidence from Portugal


  • Horácio C. Faustino
  • Nuno Carlos Leitão


Purpose - This paper aims to examine the determinants of vertical intra‐industry trade (VIIT) in the automobile components industry between Portugal and the European Union 27 (EU‐27) and the BRIC countries (Brazil, Russia, India and China) during the period 1995‐2006. Design/methodology/approach - The paper formulates some theoretical hypotheses that may explain the fragmentation of the production in the automobile industry. These hypotheses are tested using a dynamic panel data analysis. The estimates are more reliable because the instruments used control for the potential endogeneity of the explanatory variables. Findings - The results indicate that VIIT is a positive function of the difference in per‐capita GDP between Portugal and its trading partners, confirming the Linder hypothesis. Moreover, there is statistical evidence that geographical distance influences negatively this type of VIIT between Portugal and the EU‐27 only. The results do not confirm the hypothesis that there is a positive correlation between differences in endowments and VIIT in the automobile components sector. Originality/value - This paper confirms some relevant theoretical hypotheses on the causes of the fragmentation/outsourcing. The good results obtained with the Arellano and Bond GMM system estimator suggest that the building of dynamic theoretical models will be of interest to academic researchers in fragmentation theory.

Suggested Citation

  • Horácio C. Faustino & Nuno Carlos Leitão, 2011. "Fragmentation in the automobile manufacturing industry: evidence from Portugal," Journal of Economic Studies, Emerald Group Publishing Limited, vol. 38(3), pages 287-300, August.
  • Handle: RePEc:eme:jespps:v:38:y:2011:i:3:p:287-300
    DOI: 10.1108/01443581111152409

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    Cited by:

    1. Joana Almodovar & Aurora A.C. Teixeira, 2014. "Assessing the Importance of Local Supporting Organizations in the Automotive Industry: A Hybrid Dynamic Framework of Innovation Networks," European Planning Studies, Taylor & Francis Journals, vol. 22(4), pages 841-865, April.
    2. Senthil Kumar Muthusamy & Ramadevi Kannan, 2023. "Profits crisis: evolving patterns of firm size and performance in traditional U.S. industries," Economia e Politica Industriale: Journal of Industrial and Business Economics, Springer;Associazione Amici di Economia e Politica Industriale, vol. 50(3), pages 575-603, September.
    3. José Alberto Fuinhas & Matheus Koengkan & Nuno Carlos Leitão & Chinazaekpere Nwani & Gizem Uzuner & Fatemeh Dehdar & Stefania Relva & Drielli Peyerl, 2021. "Effect of Battery Electric Vehicles on Greenhouse Gas Emissions in 29 European Union Countries," Sustainability, MDPI, vol. 13(24), pages 1-26, December.


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