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Subcontracting or Exporting with Flexible Manufacturing

In: Positive and Normative Analysis in International Economics

Author

Listed:
  • Wen-Jung Liang
  • Chao-Cheng Mai

Abstract

According to Eaton and Schmitt (1994), the essence of flexible manufacturing is scope economies in the production of differentiated goods.1 Eaton and Schmitt introduce scope economies as a device for a basic product to be modified to produce differentiated variants. They argue that firms can develop the ability to produce a basic product while incurring a sunk cost of product development. This basic product can be further modified to produce differentiated variants, albeit with an extra switching cost.

Suggested Citation

  • Wen-Jung Liang & Chao-Cheng Mai, 2012. "Subcontracting or Exporting with Flexible Manufacturing," Palgrave Macmillan Books, in: Murray C. Kemp & Hironobu Nakagawa & Tatsuya Uchida (ed.), Positive and Normative Analysis in International Economics, chapter 8, pages 138-156, Palgrave Macmillan.
    • Handle: RePEc:pal:palchp:978-0-230-34820-2_9
    DOI: 10.1057/9780230348202_9
    as

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