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Manufacturing renaissance: return of manufacturing to western countries

In: Innovation and Entrepreneurship in the Global Economy

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Listed:
  • Sam Tavassoli
  • Babak Kianian
  • Tobias C. Larsson

Abstract

This chapter argues that the location of manufacturing is gradually shifting to the west again, exemplifying the ‘manufacturing renaissance’. Such a claim is based on the recent observed trend and the discussion is contextualized within the established theory that has been able to explain the location of manufacturing, that is, the product life cycle (PLC) model. Then the chapter identifies and discusses the four main drivers of this new phenomenon: (i) rising wage levels in emerging economies; (ii) falling quality of business milieu in emerging economies; (iii) emergence of new process innovations in western economies; and (iv) rising demand for western-made manufacturing. Finally, it is noted that the return of manufacturing should be kept in proportion to the amount of manufacturing activities that are still being offshored to less developed countries (LDCs), and not all industries are coming back to the west at the same pace.

Suggested Citation

  • Sam Tavassoli & Babak Kianian & Tobias C. Larsson, 2015. "Manufacturing renaissance: return of manufacturing to western countries," Chapters, in: Charlie Karlsson & Urban Gråsjö & Sofia Wixe (ed.), Innovation and Entrepreneurship in the Global Economy, chapter 11, pages 261-280, Edward Elgar Publishing.
    • Handle: RePEc:elg:eechap:15906_11
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    References listed on IDEAS

    as
    1. Swenson, Deborah L., 2005. "Overseas assembly and country sourcing choices," Journal of International Economics, Elsevier, vol. 66(1), pages 107-130, May.
    2. Karlsson, Charlie & Gråsjö, Urban & Wixe, Sofia, 2014. "Innovation and entrepreneurship in the global economy," Working Paper Series in Economics and Institutions of Innovation 385, Royal Institute of Technology, CESIS - Centre of Excellence for Science and Innovation Studies.
    3. Puga, Diego & Venables, Anthony J., 1996. "The Spread of Industry: Spatial Agglomeration in Economic Development," Journal of the Japanese and International Economies, Elsevier, vol. 10(4), pages 440-464, December.
    4. Louis T. Wells, 1969. "Test of a Product Cycle Model of International Trade: U. S. Exports of Consumer Durables," The Quarterly Journal of Economics, Oxford University Press, vol. 83(1), pages 152-162.
    5. Gene M. Grossman & Elhanan Helpman, 2005. "Outsourcing in a Global Economy," Review of Economic Studies, Oxford University Press, vol. 72(1), pages 135-159.
    6. David J. TEECE, 2008. "TRANSACTIONS COST ECONOMICS AND THE MULTINATIONAL ENTERPRISE: An Assessment," World Scientific Book Chapters,in: The Transfer And Licensing Of Know-How And Intellectual Property Understanding the Multinational Enterprise in the Modern World, chapter 20, pages 427-451 World Scientific Publishing Co. Pte. Ltd..
    7. Utterback, James M & Abernathy, William J, 1975. "A dynamic model of process and product innovation," Omega, Elsevier, vol. 3(6), pages 639-656, December.
    8. John Cantwell, 2009. "Location and the multinational enterprise," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 40(1), pages 35-41, January.
    9. William B. Bonvillian, 2012. "Reinventing American Manufacturing: The Role of Innovation," Innovations: Technology, Governance, Globalization, MIT Press, vol. 7(3), pages 97-125, July.
    10. Dosi, Giovanni, 1988. "Sources, Procedures, and Microeconomic Effects of Innovation," Journal of Economic Literature, American Economic Association, vol. 26(3), pages 1120-1171, September.
    11. Vernon, Raymond, 1979. "The Product Cycle Hypothesis in a New International Environment," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 41(4), pages 255-267, November.
    12. Malerba, Franco & Orsenigo, Luigi, 1997. "Technological Regimes and Sectoral Patterns of Innovative Activities," Industrial and Corporate Change, Oxford University Press, vol. 6(1), pages 83-117.
    13. John H Dunning, 1980. "Towards an Eclectic Theory of International Production: Some Empirical Tests," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 11(1), pages 9-31, March.
    14. Klaus E Meyer, 2001. "Institutions, Transaction Costs, and Entry Mode Choice in Eastern Europe," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 32(2), pages 357-367, June.
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    More about this item

    Keywords

    Business and Management; Economics and Finance; Environment; Geography; Innovations and Technology; Urban and Regional Studies;

    JEL classification:

    • E02 - Macroeconomics and Monetary Economics - - General - - - Institutions and the Macroeconomy
    • E22 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Investment; Capital; Intangible Capital; Capacity
    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • O14 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Industrialization; Manufacturing and Service Industries; Choice of Technology

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