International Production Networks in Asia: Rivalry or Riches

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

How globalization reshapes Asian production networks

Dieter Ernst and John Ravenhill

Introduction: does globalization lead to increasing convergence?

Commentators writing from a variety of theoretical perspectives expect globalization to act as a powerful equalizer, both among nations and among firms. 1 Among nations, globalization imposes new constraints on the policy-making of national governments, constraints that force a convergence towards economic liberalization, balanced budgets, and lower expenditures on welfare (Schwartz 1994; Cerny 1995). Convergence is also expected among firms. Faced with similar constraints, firms will converge in their organization and strategies, irrespective of their national origin (Vernon 1971, 1977; Graham and Krugman 1989). Boyer (1996:47) has succinctly summarized the underlying logic, "…everywhere firms facing the same optimizing problems find the same solution in terms of technology, markets and products, for there is one best way of organizing production-a single optimum among a possible multiplicity of local optima." 2

It is the impact of globalization on firm strategies that we examine in this chapter. A significant literature has recently emerged in response to some of the overgeneralizations put forward by some enthusiast proponents of globalization. We believe, however, that several key weaknesses are apparent in how this literature discusses the impact of globalization on American and Japanese corporations.

Rarely does the literature look at how specific elements of the globalization process exert an impact on corporate structures and activities. Globalization is often left undefined; the linkages between its various elements and aspects of corporate behavior and governance remain unspecified. Moreover, the literature gives insufficient attention to the timing and dynamics of the globalization process. The globalization of the Japanese economy took off in earnest only in the mid-1980s, after the Plaza Agreement of the Group of Seven industrialized economies. In the late 1980s, the overseas subsidiaries of Japanese companies were newcomers to export-oriented production. 3 A static snapshot of the differences between American and Japanese corporations as reflected in data from the early 1990s therefore may capture


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