Strategic Capacity Planning Problems in Revenue‐Sharing Joint Ventures

Peer Reviewedhttps://deepblue.lib.umich.edu/bitstream/2027.42/154244/1/poms13128_am.pdfhttps://deepblue.lib.umich.edu/bitstream/2027.42/154244/2/poms13128.pd

What Permits Small Firms to Compete in High-Tech Industries? Inter-Organizational Knowledge Creation in the Taiwanese Computer Industry

This paper addresses a puzzle related to firm size and competition. Since Stephen Hymer´s pioneering contribution (Hymer, 1960/1976), theories of the firm implicitly assume that only large, diversified multinational enterprises can compete in industries that combine high capital intensity, high knowledge-intensity and a high degree of internationalization. Small firms, by definition, have limited resources and capabilities and are unlikely to possess substantial ownership advantages. They also have a limited capacity to influence and shape the development of markets, market structure and technological change. One would thus expect that they are ill-equipped to compete in a knowledge-intensive industry that is highly globalized. Taiwan’s experience in the computer industry tells a different story: despite the dominance of small- and medium-sized enterprises (SMEs), Taiwan successfully competes in the international market for PC-related products, key components and knowledge-intensive services. The paper inquires into how this was possible. It is argued that organizational innovations related to the creation of knowledge are of critical importance. Taiwanese computer firms were able to develop their own distinctive approach: due to their initially very narrow knowledge base, access to external sources of knowledge has been an essential prerequisite for their knowledge creation. Such “inter-organizational knowledge creation” (Nonaka and Takeuchi, 1995) was facilitated by two factors: active, yet selective and continuously adjusted industrial development policies; and a variety of linkages with large Taiwanese business groups, foreign sales and manufacturing affiliates and an early participation in international production networks established by foreign electronics companies. A novel contribution of this paper is its focus on inter-organizational knowledge creation. I first describe Taiwan´s achievements in the computer industry. The dominance of SMEs and their role as a source of flexibility is documented in part II. Part III describes some policy innovations that have shaped the process of knowledge creation. The rest of the paper inquires how inter-organizational knowledge creation has benefited from a variety of linkages with large domestic and foreign firms; I also address some industrial upgrading requirements that result from this peculiar type of knowledge creation.knowledge creation; learning; small firms; networks; firm strategy; industrial policies;

Transnational corporations, state and classes in Turkey: the rise of new forms of dependent development in global automotive value chains

Is dependency theory dead as an explanation of underdevelopment in today’s global economy? Has the rise of new economic powerhouses and an increasing share of higher value-added manufacturing in the global south cast the notions of subordination, peripherality and dependence into the dustbin of history? Today, a broad consensus answers these questions in the affirmative. In stark contrast to this commonly-held contention in the current development discourse, this study aims to bring these notions back to critical development studies by offering an up-to-date and analytically valid conceptualisation of dependency in today’s global south. Taking the historical-structural dependency perspective as a point of departure, the study revisits and builds upon the notion of dependent development by drawing on a set of conceptual insights derived from Schumpeter’s theory of innovation, Global Value Chain analyses and a class-relational articulation of the developmental state. In doing so, the study shows how core-like and periphery-like activities have clustered in time and space, leading to polarisation in today’s global economy, and how new forms of dependency have been spatially re-produced along hierarchically-structured global value chains through the interplay of transnational corporations, states and classes. Based on this framework, the study then explores the limits and prospects of capitalist development and its implications for wider society in today’s global south. With occasional references to cases of dependent development in Latin America and East Asia, the study examines changing dynamics and rise of new forms of dependency relations in Turkey and the Turkish automotive industry. Adding a sense of change and movement, the study shows how dependent nature of Turkish capitalist development has concretised and taken new forms along automotive value chains through shifting configurations of class forces and state-society relations, and their manifold interactions with the world economy, from the early years of modern Turkey to the present

Globalisation of production and markets.

Internationale Arbeitsteilung; Direktinvestition; Internationale Unternehmenskooperation; Industriegüteraußenhandel; Internationaler Wettbewerb; Welt; EU-Staaten; USA; Japan;

Contracting for innovation : vertical disintegration and interfirm collaboration

Rapidly innovating industries are not behaving the way theory expects. Conventional industrial organization theory predicts that, when parties in a supply chain have to make transaction-specific investments, the risk of opportunism will drive them away from contracts and toward vertical integration. Despite the conventional theory, however, contemporary practice is moving in the other direction. Instead of vertical integration, we observe vertical disintegration in a significant number of industries, as producers recognize that they cannot themselves maintain cutting-edge technology in every field required for the success of their products. In doing this, the parties are developing forms of contracting beyond the reach of contract theory models. In this Article, we connect the emerging contract practice to theory, learning from what has happened in the real world to frame a theoretical explanation of this cross-organizational innovation and to reconceptualize the boundaries of the firm accordingly. We argue that the vertical disintegration of the supply chain in many industries is mediated neither by fully specified technical interfaces that allow suppliers to produce a modular piece of the ultimate product, nor by entirely implicit relational contracts supported only by norms of reciprocity and the expectation of future dealings. Rather, we suggest that the change in the boundary of the firm has given rise to a new form of contracting between firms -- what we call "contracting for innovation." This pattern braids explicit and implicit contracting to support iterative collaborative innovation by raising switching costs. These costs, represented by the parties' parallel transaction-specific investments in knowledge about their collaborators' capacities, deter opportunism under circumstances where explicit contracting, renegotiation, and the anticipation of future dealings cannot

Falling behind or catching up? Developing countries in the era of globalization

Globalization improves the prospects for developing countries (DCs) to catch up economically with industrialized countries. But not all DCs will automatically benefit from globalization. Some DCs even face the risk of being delinked from the international division of labor. Differences in DC economic policies ultimately determine whether there will be a deepening divide between rich and poor countries in the world economy. Many observers draw an overly pessimistic picture of the perspectives of DCs in the era of globalization because of missing institutionalized links to regional integration schemes in Europe and North America, a low level of interfirm technology cooperation between industrialized countries and DCs, and a high concentration of foreign direct investment (FDD flows on only a few DC hosts. However, such concerns are largely unfounded: Asian DCs are most successful in globalization although they have remained outside institutionalized integration schemes, while ACP countries have not made much progress despite their preferential access to EU markets. Technology transfers between industrialized countries and DCs mainly occur through FDI and trade in capital goods, rather than through interfirm technology cooperation. Recent trends in FDI and international trade strongly support the proposition that DCs have become closely integrated into globalization strategies. A high concentration of FDI flows on a few DC hosts does not imply that new attractive locations cannot compete for international capital. Admittedly, it is true that between two thirds and three quarters of total FDI flows to DCs have persistently been absorbed by ten host economies. But the country composition of this group has changed over time. Globalization implies an increase in international investment cooperation. Case studies for selected DC industries show that FDI prevails in industries applying sophisticated technologies, whereas licensing and subcontracting are favored when production processes are standardized. Policy interventions may limit the choices open to investing foreign firms and, thereby, cause substitution effects between different forms of globalization or hinder globalization at all. The quality of DC economic policies determines whether these countries will succeed in joining the globalization club. The experience of the frontrunners among DCs suggests some basic policy conclusions: Openness towards world markets is a precondition for becoming involved in globalization strategies of transnational corporations. Liberalizing all forms of international investment cooperation and removing barriers to international trade should rank high on the policy agenda of DCs. Under conditions of globalized production, DC governments are increasingly constrained in pursuing policies of their own liking. Those DCs characterized by pronounced macroeconomic instability are relatively unattractive locations for international investors. Investment in physical and human capital plays a crucial role in enabling DCs to participate in globalization. Economic policies that discourage domestic saving and investment must be avoided. Financial market reforms are needed in DCs characterized by financial repression and inefficient intermediation between savers and investors. A better education of the workforce is required for a successful application of new technologies that become available through globalization. --

Ambiguity aversion in buyer-seller relationships: A contingent-claims and social network explanation

Negotiations between buyers and sellers (or suppliers) of goods and services have become increasingly important due to the growing trend towards international purchasing, outsourcing and global supply networks together with the high uncertainty associated with them. This paper examines the effect of ambiguity aversion on price negotiations using multiple-priors-based real options with non-extreme outcomes. We study price negotiation between a buyer and seller in a dual contingent-claims setting (call option holding buyer vs. put option holding seller) to derive optimal agreement conditions under ambiguity with and without social network effects. We find that while higher ambiguity aversion raises the threshold for commitment for the seller, it has equivocal effects on the buyer's negotiation prospects in the absence of network control. Conversely when network position and relative bargaining power are accounted for, we find the buyer's implicit price (or negotiation threshold) decreases (or increases) unequivocally with increasing aversion to ambiguity. Extending extant real options research on price negotiation to the case of ambiguity, this set of results provides new insights into the role of ambiguity aversion and network structures in buyer-seller relationships, including how they influence the range of negotiation agreement between buyers and sellers. The results also help assist managers in formulating robust buying/selling strategies for bargaining under uncertainty. By knowing their network positions and gathering background information or inferring the other party's ambiguity tolerance beforehand, buyers and sellers can anticipate where the negotiation is heading in terms of price negotiation range and mutual agreement possibilities

Modular Production's Impact on Japan's Electronics Industry

This paper examines the notion that national industrial models evolve with time, and provides evidence of transformation when elements are transferred from one society to another. The Japanese Production System, itself an adaptation of American-style mass production to the constraints of the post World War Two Japanese economy, in turn had a profound impact on the organization of industrial production in the United States, especially during the 1990s. I characterize the new model that emerged in the United States as the “Modular Production System.” This paper examines the response of Japanese electronics firms to Modular Production in the period 2000-2004. It is based on forty-three interviews with top managers at Japan’s largest electronics firms, conducted during the calendar years 1999-2004, as well as insights gained from more than 600 field interviews conducted between 1999 and 2005 for the MIT Industrial Performance Center’s Globalization Study. I argue that Japanese electronics firms have been strongly influenced by Modular Production but that they have, unsurprisingly, adapted it to their current environment and in the process may have begun to transform both the Japanese and Modular Production Systems. While it is too early to determine if these changes amount to the emergence of a distinct industrial model, the chapter concludes by laying out the challenges and opportunities that now face Japanese electronics firms given their recent experiments with joint technology development, production alliances, and global outsourcing