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.

Diverging Development Paths of the Electronics Industry in Korea and Taiwan

This paper examines the process and mechanism of economic development in the Republic of Korea and Taiwan through a comparative analysis of the electronics industry in each country. The paper will show that in its initial stage of development, the electronics industry in both economies had the same type of dual structure: a domestic demand sector based on the protected domestic market, and an export sector intended to capitalize on low-wage labor for the international market. However, this dual structure in the two economies faded away after the mid-1970s as their respective indigenous export-oriented enterprises began to develop. But the primary industrial players in each economy were very different. In Korea they were comprehensive electronics manufacturers affiliated with chaebols, and in Taiwan they were small and medium-size enterprises. Differences in the two economies' development mechanisms have brought about this divergence in development paths. In Korea this mechanism has been characterized by the government's positive role and the chaebol's readiness to react to the government's leadership. In Taiwan the development mechanism has been based on the private sector independent from the government. As an extension of such diverged development paths, ICs and personal computers showed spectacular growth in Korea and Taiwan after the 1980s. The development of ICs in Korea was primarily the result of a decisive role played by the chaebol's sizable financial resources, while the competitiveness in personal computers largely reflected the agility and flexibility of Taiwanese small and medium-size enterprises.