Boundaries of firms and catching up by latecomers in global production networks : the case of a Mexican auto-parts manufacturer

For manufacturing firms in developing countries, there are high barriers to entry and to catching up with competitors in their global production networks (GPNs). This paper examines the case of a Mexican auto-parts manufacturer that succeeded in catching up in the automotive GPN. The author proposes that the door to GPNs is open thanks to frequent changes in the boundaries of firms, and also stresses the importance of the necessary conditions that generate opportunities, including institutional settings that facilitate market entry and catching up, and capability building by firms hopeful of entry.

Diversified boundaries of the firm

We analyze diversification of boundaries of local firms in developing countries under the economic globalization. The globalization has an aspect of homogenization of the world economy, but also has another aspect of diversification through international economic activities. Focusing on boundary-level of the firm, this article shows that the diversification from a comparison with boundaries of foreign firms in developed countries is brought by a disadvantage of technology deficit and a home advantage as local firms.

Impact of product-related environmental regulations in Asia : descriptive statistics from a survey of firms in Penang, Malaysia

This paper summarizes the main results of a unique firm survey conducted in Penang, Malaysia in 2012 on product-related environmental regulations. The results show that firms receiving foreign-direct investment have adapted well to regulations but faced more rejections. Several research questions are addressed and examined by using the survey data. Major findings are as follows. First, adaptation involves changes in input procurement and market diversification, which potentially changes the structure of supply chains. Second, belonging to global supply chains is a key factor in compliance, but this requires firms to meet tougher customer requirements. Third, there is much room for government policy to play a role in assisting firms.

Impact of product-related environmental regulations in Asia : descriptive statistics from a survey of firms in Vietnam

This paper summarizes the main results of a unique firm survey conducted in Vietnam in 2011 on product-related environmental regulations (PRERs). The results of this survey are compared with the results of a corresponding survey of firms in Penang, Malaysia (Michida, et al. 2014b). The major findings are as follows. First, adaptation to PRERs involves changes in input procurement and results in market diversification, which potentially alters the structure of supply chains. This finding is consistent with the Malaysian survey result. Second, connections to global supply chains are key to compliance, but this requires firms to meet more stringent customer requirements. Third, government policy can play an important role in assisting firms to comply with PRERs.

Impact on Asian firms of product-related environmental regulations through global supply chains : a study of firms in Malaysia

This paper sheds light on the important role played by global supply chains in the adaptation to product-related environmental regulations imposed by importing countries, with a focus on chemicals management. By utilizing a unique data collected in Penang, Malaysia, we depict the supply chain structures and how differences among firms in participation to global supply chain link to differences in chemical management. We found that firms belonging to a supply chain are in a better position to comply with these regulations because information and requirements are transmitted through global supply chains. In contrast, those firms that are neither exporters nor a part of a global supply chain lack the knowledge and information channels relevant to chemical management in a product.

Neutrality in the choice of number of firms or level of fixed costs in calibrating an Armington-Krugman-Melitz encompassing module for applied general equilibrium models

This paper shows how an Armington-Krugman-Melitz encompassing module based on Dixon and Rimmer (2012) can be calibrated, and clarifies the choice of initial levels for two kinds of number of firms, or parameter values for two kinds of fixed costs, that enter a Melitz-type specification can be set freely to any preferred value, just as the cases we derive quantities from given value data assuming some of the initial prices to be unity. In consequence, only one kind of additional information, which is on the shape parameter related to productivity, just is required in order to incorporate Melitz-type monopolistic competition and heterogeneous firms into a standard applied general equilibrium model. To be a Krugman-type, nothing is needed. This enables model builders in applied economics to fully enjoy the featured properties of the theoretical models invented by Krugman (1980) and Melitz (2003) in practical policy simulations at low cost.

On the Evolution of the Spatial Economy with Multi-unit/Multi-plant Firms: The Impact of IT Development

This paper examines how the decline of communication costs between management and production facilities within firms and the decrease in trade costs of manufactured goods affect the spatial organization of a two-region economy with multi-unit/multi-plant firms. The development of information technology decreases the costs of communication and trade costs. Thus, the fragmentation of firms is promoted. Our result indicates that, with decreasing communication costs, firms producing low trade-cost products (such as consumer electronics) tend to concentrate their manufacturing plants in low wage countries. In contrast, firms producing high trade-cost products (such as automobiles) tend to have multiple plants serving to segmented markets, even in the absence of wage differentials.

Regional Cooperation of Small & Medium Firms in Japanese Industrial Clusters

This study examines the effects of intra-regional cooperation among firms and institutions on the growth of firms, using the unique data set of questionnaire survey collected in the three major industrial clusters in Japan. In contrast to the existing studies on regional innovations or agglomeration economies, this study explicitly focuses on the detailed contents of cooperative activities with two specific viewpoints: 1) the contents of regional cooperation in each of the three production stages of R&D, commercialization, and marketing, and 2) the detailed types of alliance partners. Our results demonstrate three points: 1) positive correlations are observed between the intensity of regional cooperation and the firm growth rate and R&D expenditure, 2) horizontal cooperation such as alliances with universities and cross-industry exchange organizations has positive significant effects on the growth rate of firms, which is in contrast with the previous studies that stressed only the role of vertically integrated inter-firm linkages in Japan, and 3) contents and partners of regional cooperation are different among the three clusters based on different dominant industries.

Growth of the Firm and Economic Backwardness: A Case Study and Analysis of China's Mobile Handset Industry

Economic backwardness often influences the growth of firms in developing countries. In this paper, we investigate the growth conditions and paths available for latecomers competing with first movers. Employing the concepts of boundaries of the firm and the disadvantage of backwardness, we present a case study of China's mobile handset industry and proceed to develop a simple model. We find that although significant disadvantage does not allow latecomers to grow, there are possibilities for changing the conditions of growth if latecomers can utilize outside resources and/or indigenous advantages.

The Technology Gap and the Growth of the Firm: A Case Study of China's Mobile-phone Handset Industry

We have examined the way in which local Chinese firms confronted with a technology gap have achieved growth, using the Chinese handset industry as a case study. Chinese local firms have lacked technology, and have therefore turned to outside firms for development, design, and manufacturing, while they themselves have focused on sales and marketing, using their advantage of familiarity with the Chinese market. Consequently, by establishing a growth condition in which their selection of boundaries counterbalances the technology gap they have been able to expand their market share in comparison with foreign firms.

The business management strategy of Iran's large apparel firms : overview of results from a questionnaire survey and interviews 2009-2011

This paper is an overview of the results from a questionnaire survey and subsequent supplementary interviews of Iran's large apparel firms conducted by the author in 2009-2011. Most of the large apparel firms in Iran are based in Tehran and have been in business for some twenty years. They have a solid business with regular customers, but in general have hesitated to expand the size of their firms. Following the relaxation of restrictions on the procurement of raw materials that existed in the 1990s, the results of survey and interviews show that the firms have developed new channels of procurement although they depend to a considerable degree on imported raw materials and machinery. They have managed to maintain their level of output even with the rapid increase in imports since 2000, although the number of firms has decreased. Low-priced Chinese products have basically not been their rivals; instead, the inflow of foreign name-brand products have hit them heavily.

Competition between firms in developing and developed countries

We analyze competition in emerging markets between firms in developing and developed countries from the viewpoint of the boundaries of the firm. Although indigenous firms generally face a disadvantage in technology compared with foreign firms, they have an advantage in marketing as local firms. Moreover, they have opportunities to leave weaker fields to independent specialized firms and use lower wages. On the other hand, foreign firms also have their own advantages and disadvantages for growth. Therefore, entry conditions for indigenous firms can vary greatly depending on the situation. We classify these conditions into eight cases by developing a model and showing each boundary choice for indigenous firms.

A Distributive Comparison of Enterprise Size in Korea and Taiwan

Research to date on the economic development of the Republic of Korea and Taiwan has frequently contrasted the two economies by depicting the former as centered on large-scale enterprises and the latter on small and medium-size enterprises (SMEs). The purpose of this study is to see if the appropriateness of this perception will also be verified by the statistical data. In Section I the authors utilized census data on the Korean and Taiwanese manufacturing sectors to compare the distribution pattern of the sizes of enterprises in the two economies. However, on examining the available data for making this comparison, the authors discovered that for Korea the statistics provided are those at the level of the establishment (a physical unit engaging in industrial activities such as a factory, workshop, office, or mine) while the statistics for Taiwan are those at the enterprise level. Mindful of this difference, the authors looked at the portion of the economy accounted for by large-scale establishments in Korea that employed 500 workers or more and by enterprises in Taiwan employing the same number of workers, and they discovered that the portion that these large-scale businesses account for, especially in the area of output, has steadily declined since the 1980s. When comparing the share of total production that these large-scale establishments/enterprises account for in the two economies, the authors concluded that those in Korea accounted for a larger share of that economy's production than did their counterparts in Taiwan. The authors then compared the portion of the economy accounted for by establishments in Korea and enterprises in Taiwan that employed less than ten workers, and they found that the portion of the two economies that these very small-scale production units accounted for has also been on the decline. Section II compares the portions of the two economies accounted for by large business groups. After comparing the percentage of GDP accounted for by the total sales of these business groups, the authors found that large business groups in Korea have played a far more important role in Korean economy than has been the case for such groups in Taiwan. This difference in the importance of such business groups in the two economies has also played an significant part in fostering the perceived dichotomy of large-scale enterprises playing the important role in Korea versus SMEs being the important players in Taiwan. Section III compares the percentage of total exports accounted for by SMEs, and shows that SMEs in Taiwan account for a larger share of exports than do their counterparts in Korea. This section also shows that in Taiwan the share of export sales for SMEs has consistently exceeded that for non-SMEs, while in Korea the relationship between enterprise size and the rate of export sales has been directly proportional. This difference in the size of the major export players is another factor fostering the perception of the Korean economy being centered on big business while Taiwan's is on SMEs. Although there were difficulties and limitations when comparing the data of the two economies, the statistical comparison undertaken in this study shows that in general big business has played the major role in the development of the Korean economy while in Taiwan's economic development this role has been played by SMEs. Thus the statistical data also verifies the perceived dichotomy of these two economies.

Explaining the Persistence of State-ownership in China

In the recent decade China witnessed an upsurge of privatization of small and medium state-owned enterprises (SOEs). In contrast to the consequent sharp reduction in the number of firms, however, the estimated share of broadly-defined SOEs that includes limited liabilities companies controlled by the State has shown virtually no sign of decline. We explain the backgrounds of this seemingly paradoxical persistence of state-ownership by looking into two distinctive types of large SOEs: traditional SOEs that remain dominant in oligopolistic industries and manager-controlled SOEs surviving in competitive industries. The two types exemplify several factors constraining further progress of SOE reform such as, financing the costs of restructuring, redefining the role of the State as the single dominant shareholder, and balancing the interests of the State and managers as entrepreneurs. Sorting these issues out will take time, which means that instabilities associated with state corporate ownership will remain in place in the foreseeable future in China.

Trade Coefficients and the Role of Elasticity in a Spatial CGE Model Based on the Armington Assumption

The Armington Assumption in the context of multi-regional CGE models is commonly interpreted as follows: Same commodities with different origins are imperfect substitutes for each other. In this paper, a static spatial CGE model that is compatible with this assumption and explicitly considers the transport sector and regional price differentials is formulated. Trade coefficients, which are derived endogenously from the optimization behaviors of firms and households, are shown to take the form of a potential function. To investigate how the elasticity of substitutions affects equilibrium solutions, a simpler version of the model that incorporates three regions and two sectors (besides the transport sector) is introduced. Results indicate: (1) if commodities produced in different regions are perfect substitutes, regional economies will be either autarkic or completely symmetric and (2) if they are imperfect substitutes, the impact of elasticity on the price equilibrium system as well as trade coefficients will be nonlinear and sometimes very sensitive.