Locating Global Advantage: Industry Dynamics in the International Economy

Locating Global Advantage: Industry Dynamics in the International Economy

Locating Global Advantage: Industry Dynamics in the International Economy

Locating Global Advantage: Industry Dynamics in the International Economy

Synopsis

What are the forces that are driving firms and industries to globalize their operations? This volume explores how specific industries have organized their global operations, through case studies of seven manufacturing industries: garments and textiles, automobiles and auto parts, televisions, hard disk drives, flat panel displays, semiconductors, and personal computers. Based on long-term research sponsored by the Sloan Foundation, the chapters provide readers with a nuanced understanding of the complex matrix of factor costs, access to inimitable capabilities, and time-based pressures that influence where firms decide to locate particular segments of the value chain. The book examines globalization within the context of five factors affecting locational decisions: advances in transportation and communication; the clustering of knowledge assets; the drive to reduce cycle times; the commodification of existing products; and the relative advantages of proximity to customers. The case studies are framed by Paul Deguid's Preface on the significance of power in value chains and Bruce Kogut's conclusion on the importance of knowledge in locational decisions. Together, the chapters reveal a remarkable diversity of responses across industries to these forces, and suggest that any understanding of globalization must appreciate this diversity. This volume is ideal for both MBA and undergraduate students studying the location of economic activities by multinational firms.

Excerpt

The motor vehicle industry offers a unique perspective on globalization, because, with its massive employment, huge corporations, and iconic products, it seems to sum up a country's psyche—GM and Ford for the United States, Fiat and Ferrari for Italy, Toyota and Honda for Japan, Mercedes and bmw for Germany, Volvo and Saab for Sweden, and Hyundai and Kia for Korea. in advanced economies, motor vehicle employment is closely watched as a bellwether of manufacturing sector heath, and in many developing countries, creating and nurturing a local vehicle sector is one of the key goals of industrial policy. Moreover, the auto industry was the king of the “Fordist” economy, and when commentators thought of mass production—and its limits—the motor vehicle industry was first and foremost to be praised—and criticized. in terms of regional economies and industrial clusters, Detroit, Stuttgart, and Toyota City exemplified these par excellence, far before the term Silicon Valley was even coined. This chapter examines the tripartite processes of globalization, deverticalization, and modularization in the auto industry with a special focus on one of the most debated issues in policy circles, the impact on employment.

For us, an understanding of globalization in the auto industry cannot be gained solely through an examination of the automobile assemblers; we must also consider the auto parts suppliers, especially since they are producing an increasingly significant part of the valuee-added of finished vehicles, a process which we refer to as “deverticalization.” Parts suppliers are faced with many of the same issues as their customers, and as they capture a larger share of revenues and employment, their decisions will have a significant effect on the overall industry. Globalization and deverticalization are intertwined processes. For all automakers the make-or-buy decision is being complicated by a widen-

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