International Production Networks in Asia: Rivalry or Riches

By Michael Borrus; Dieter Ernst et al. | Go to book overview

8

Japan and the United States in the Malaysian electronics sector

Greg Linden

Malaysia provides a rich entry point for examining the differences between American and Japanese production networks in the electronics sector. In 1990, Malaysia's export-oriented electrical/electronics sector accounted for over 25 percent of the country's manufacturing output and 30 percent of manufacturing employment (Rasiah 1995: Table 5.3). Furthermore, the sector is dominated by foreign capital; in 1990 the foreign share of fixed assets in electrical/electronics was 89 percent (ibid.: Table 5.2).

Building on its initial attractiveness as a source of low cost land and labor, an economy once dominated by tin mines and rubber plantations has come to occupy an intermediate role in the regional division of labor, somewhere in the technological gap between Indonesia and Taiwan. Malaysian factories supply a range of components to other network nodes in the region and assemble a variety of final goods for shipment to destinations across the globe. Industrial policies introduced over the last decade have helped induce affiliates to upgrade their activities by assembling more valuable and complex products and by adding ancillary activities. Malaysian managers and engineers are increasingly called upon to help launch factories in other developing countries. Local suppliers have emerged in support industries, such as the injection molding of plastic parts, and also as subcontractors for assembly.

We will compare US and Japanese affiliates across five categories of behavior: linkages to the local economy, development of local human resources, introduction of higher value-added activities such as product design, capital deepening, and management autonomy. We must be careful not to ascribe all differences to the nationality factor alone. The present study permits us to hold constant certain key explanatory factors for affiliate behavior, namely the host country's policies and resources. As we proceed, we will try to account for other significant factors that might lead to observed national differences. 1

It should not be surprising that some differences between American and Japanese affiliates cannot be explained apart from their differing ownership. The organizational differences of the parent firms are so great that it would be hard to imagine that this would not affect the operation of overseas plants. For example, Japanese electronics firms have much more rigid personnel

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