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Modularity and the Organization of International Production

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  • Ari Van Assche

Abstract

In recent decades, complex manufacturing sectors such as electronics have transformed from an industry dominated by vertically integrated firms that source locally to an industry dominated by horizontally specialized firms that source globally. To account for this, 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. In industries with partial input specificity and economies of scale in input production, we find that the industry transformation can be explained by a reduction in synergistic specificity, a reduction in the cost of internationalizing and an increase in industry demand. Au cours des dernières décennies, les secteurs manufacturiers complexes, tels que celui de l'électronique, se sont transformés, passant d'une industrie dominée par des firmes intégrées verticalement et s'approvisionnant localement, à une industrie dominée par des firmes spécialisées horizontalement et s'approvisionnant sur les marchés mondiaux. Pour expliquer ce phénomène, nous construisons un modèle d'équilibre industriel entre deux pays, dans lequel les entreprises choisissent simultanément (i) l'architecture du produit, (ii) la structure de propriété et (iii) le lieu de production. Dans les industries caractérisées par une spécificité partielle d'intrants et des économies d'échelle liées à la production de ceux-ci, nous constatons que la transformation qu'a connue l'industrie peut s'expliquer par une réduction de la spécificité synergique, une réduction du coût d'internationalisation et une augmentation de la demande au sein de l'industrie.

Suggested Citation

  • Ari Van Assche, 2006. "Modularity and the Organization of International Production," CIRANO Working Papers 2006s-09, CIRANO.
  • Handle: RePEc:cir:cirwor:2006s-09
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    References listed on IDEAS

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    13. Barbara Spencer, 2005. "International outsourcing and incomplete contracts," Canadian Journal of Economics, Canadian Economics Association, vol. 38(4), pages 1107-1135, November.
    14. Galina A. Schwartz & Ari Van Assche, 2006. "Input Specificity and Global Sourcing," CIRANO Working Papers 2006s-02, CIRANO.
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    Keywords

    input specificity; modularity; outsourcing; product architecture; architecture du produit; impartition; modularité; spécificité des intrants;

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