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A theoretical model of the market entry and location decisions of entrepreneurs is developed.This model is inspired by a case study of Vik-Sandvik, a naval architecture firm in western Norway that trades its services electronically.The crucial element in the model is the introduction of a governance cost function that depends on the distance betwee...
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... (1) reducing the coordination costs among agents in the network and making geographic proximity less of a constraint; and (2) making the different tasks and activities that constitute the production process separable in time and space (MILGROM and ROBERTS, 1990;NORDÅS, 2004NORDÅS, , 2005. Third, the disintegration of multinational enterprises (GEREFFI et al., 2005) means that subcontractors from different countries increasingly are included in these firms' international production networks, 5 a process described by SALIOLA and ZANFEI (2009) as 'the changing nature of multinational enterprises' (p. ...
The aim of this paper is to investigate the impact of subcontracting on Italian manufacturing firms’ growth in the second half of the 1990s. By making use of a 5000 firms database we specifically test: a) whether and how subcontracting may affect the growth dynamics of firms; b) whether growth could be due to stronger incentives to innovate for subcontracting firms keen to move up the value chain, which would be consistent with the predictions of the Global Value Chain approach; and c) the joint influence of subcontracting and location on growth, that is whether the growth dynamics of Southern subcontractors is significantly different from those of North and Centre subcontracting firms. The main results are that i) the propensity to carry out subcontracting activities is relevant for growth, especially when allowing for a nonlinear relationship between growth and subcontracting; ii) more innovative subcontracting firms are also more susceptible to grow and iii) the deep dualism of the Italian industrial structure is once again confirmed, as Southern subcontractors show poorer performances and slower growth.
... The production chain is as strong as its weakest link with the logical consequence that producers will chose to have all links equally strong. Kremer's production function read: Milgrom and Roberts (1990) for a seminal article on modern manufacturing practices, and Nordås (2004) for a case study. Y is final output, n is the exogenous number of tasks needed to complete the production process and Kremer assumes that each task is performed by one worker where q is the quality of the worker's skills, interpreted as the ability of the worker to perform the task to perfection; q ∈ (0, 1). ...
... Second, they are subject trade barriers that are unique for the sector through the Multi-Fibre Agreement that was replaced by the Agreement on Textiles and Clothing in 1995. Third, empirical studies have found this sector to develop in the direction of vertical specialization where timeliness is particularly important for the supply of inputs (Evans and Harrigan, 2003;2004). The chemicals sector also has a high vertical specialization index and is interesting because of its capital intensity as a contrast to the clothing sector. ...
This paper explores the determinants of international outsourcing. The timeliness of delivery and the fulfilment of quality standards are important in vertical supply chains and depend critically on the availability, cost and quality of transport, communication and other logistics services, but also services such as testing and technical services contribute to enabling suppliers in low-cost countries to enter the outsourcing market. The determinants of international outsourcing are analyzed using the O-ring theory of production. Its predictions are next explored empirically by regressing vertical specialization on a number of variables affecting the timeliness of delivery and quality of the products. For this purpose the vertical specialization index developed by Hummels et al. (2001) is applied, estimated from input-output data where local and foreign sourcing of inputs is distinguished.
