The mobility capacity of the manufacturing multinational enterprise: a framework and two case studies

In this paper, I try to develop a framework, which presents the factors influencing the mobility capacity of the manufacturing activity of a multinational enterprise (the difficulty/ease with which it can transfer its manufacturing activity from the initial host territory to another territory). I differentiate five factors: (1) the nature (generic vs. specific) of the territorial resources used by the multinational’s subsidiary; (2) market access offered by production in the host territory; (3) the durability and specificity of the fixed assets owned by the multinational enterprise in the host territory; (4) other barriers making exit out of the host territory difficult (redundancy costs, interrelatedness of the subsidiary’s activity with other units of the multinational enterprise, etc.); and (5) the availability of substitute plants by the multinational enterprise that can take over the production of the host territory’s subsidiary. Once the framework is presented, I use it to analyse the mobility potential of the activities of two multinational enterprises: a Taiwanese company (Nien Hsing Textile Co.) that was assembling trousers in Nicaragua (fieldwork in 1998 and 2007) and a Japanese company (Sony) that was assembling television sets and manufacturing cathode ray tubes in Wales (fieldwork in 2000-2001). The study shows the importance, in the short run, of the heaviness of the capital goods used in production as factor limiting mobility. In the long run, however, the degree of specificity (uniqueness) of the territorial resources employed by the multinational enterprise (qualified labour, specialised suppliers, etc.) is crucial. The study shows also the risk of the “no-upgrading trap†of inward manufacturing investment for peripheral host territories. Indeed, multinational enterprises that realise small profit margin activities, and in which labour costs occupy an important share in total production costs, will want to maintain their international mobility capacity to be able to respond swiftly to changes in the configuration of location advantages. Therefore, they will restrict their sunk investments (in fixed assets, in training, in collaborations with local suppliers, etc.) in the host territory. This strategy counters the local embeddedness of the subsidiary and limits its structural economic impact on the host territory.

Foreign direct investment as engine of economic development in peripheral economies. What can we learn from the study of two different cases: the maquiladora subsidiary (Nicaragua) and a textile manufacturing subsidiary in (Albania)

Using the analysis of two apparently very different cases, a Taiwanese maquiladora subsidiary of the garment industry (Nien Hsing Textile Co.) in Nicaragua and an Italian subsidiary in Albania, we try to verify the existence of the benefits attributed by many host governments to inward manufacturing foreign direct investment as engine of development in peripheral economies. In each case, we study three specific questions: (1) the technological transfer from the subsidiary, (2) the mobility potential of the manufacturing activities of the subsidiary, and (3) the evolution of the quality of the subsidiary (integration in the territory and complexity of the activities realised) in time. In answering our questions we conduct fieldwork in the two countries. We interacted directly with stakeholders involved in the operations of each subsidiary including interviews with corporate managers and employees, data collection on subsidiary operations, and visits on production sites. We analyze the main channels of technology transfer focusing on the quality of linkages each subsidiary established in the local economy, on the level of additional formal and informal knowledge benefiting the local labor force, and on the support offered to local suppliers in strengthening production activities. We continue by identifying the main factors affecting the mobility of each subsidiary by differentiating between impeding and facilitating factors. Among impeding factors we concentrate on: (a) the resources (generic vs. specific) utilized by each subsidiary in the two countries, (b) market access opportunities in the local economy, (c) the nature of assets owned and engaged in realizing production activities, and (d) other factors constraining the mobility potential (exit costs and the level of integration of each subsidiary with other units of the multinational enterprise). With regard to facilitating factors we particularly consider the existence of substitute plants. In responding to our third question, we look into the nature of linkages (developmental vs. dependent) established by each subsidiary with local suppliers. Furthermore, we examine not only the change in the level of complexity of functions and duties occurring during the operational life of the subsidiaries but also the specific factors that trigger such a change. Among the factors considered in our research are the decisions made by headquarters on allocation of responsibilities, actions taken by the managers supervising each subsidiary, and on the dynamics occurring in the local business environment. The similarities and differences found in the two cases cast doubts upon the contribution of this investment to the development potential of the economy of the host territory.Postprint (published version

Locational flexibility of the manufacturing multinational enterprise: a framework and two case studies

flexibility of a multinational enterprise (the difficulty/ease with which it can transfer its manufacturing activity from the initial host territory to another territory). I differentiate five factors: (1) the nature (generic vs. specific) of the territorial resources used by the multinational’s subsidiary; (2) market access offered by production in the host territory; (3) the durability and specificity of the assets owned by the multinational enterprise in the host territory; (4) other barriers making exit out of the host territory difficult (redundancy costs, interrelatedness of the subsidiary’s activity with other units of the multinational enterprise, etc.); and (5) the availability of substitute plants by the multinational enterprise that can take over the production of the host territory’s subsidiary. Once the framework is presented, I use it to analyse the mobility potential of the activities of two multinational enterprises: a Taiwanese company (Nien Hsing Textile Co.) that was assembling trousers in Nicaragua (fieldwork in 1998 and 2007) and a Japanese company (Sony) that was assembling television sets and manufacturing cathode ray tubes in Wales (fieldwork in 2000-2001). The study shows the importance, in the short run, of the heaviness of the capital goods used in production as factor limiting mobility. In the long run, however, the degree of specificity (uniqueness) of the territorial resources employed by the multinational enterprise (qualified labour, specialised suppliers, etc.) is crucial. The study shows also the risk of the “no-upgrading trap” of inward manufacturing investment for peripheral host territories. Indeed, multinational enterprises that realise small profit margin activities, and in which labour costs occupy an important share in total production costs, will want to maintain their international locational flexibility to be able to respond swiftly to changes in the configuration of location advantages. Therefore, they will restrict their sunk investments (in fixed assets, in training, in collaborations with local suppliers, etc.) in the host territory. This strategy counters the local embeddedness of the subsidiary and limits its structural economic impact on the host territory.Postprint (published version

La flexibilité de localisation de l'entreprise multinationale: une grille d'analyse appliquée à une entreprise maquiladora au Nicaragua

N ous développ ons un e grille d’analyse qui présente les facteurs influença nt la flexibilité de localisation d'une entreprise multinati onale : la diffi culté/facilité avec laquelle e l le peut transférer son activité manufacturière d’un territoire d’accueil à un autre en réponse à un changement . Nous distinguons trois catégories de facteurs: (1) les avantages de localisation qu’offre le terr itoire d’accueil à l’entreprise multinationale ( la nature (générique ou spécifique) des ressources territoriales utilisées par la filiale , le coût de celles - ci, l’accès à un marché offert par la production dans le territoire d’ accueil ) ; (2 ) les barrières à la sortie du territo i re d’accueil ( la durabilité et la spéci ficité des actifs détenus par l’ entreprise multinationale dans le territoire d'accueil et d’ autres obstacles qui entravent la sortie du territoire d’ accueil ) et ( 3 ) la disponibilité ou non d’aut res établissements de l’ entreprise multinationale qui peu ven t reprendre la production de la filiale du territoire d’accueil . Une fois l a grille présenté e , nous l'utilisons pour analyser le potenti el de mobilité des activités d’ une entreprise taïwanaise ( NH T ) qui confectionn e des pantalons au Nicaragua ( étude sur le terrain en 1998 et en 2007) . L’étude montre comment cette entreprise , grâce à l’utilisation de biens d’équipement légers, l’emploi de ressources territoriales génériques (omniprésentes) et un con texte légal favorable, jouit d’une flexibili té de localisation élevée. Ce genre d’entreprise étrangère de l’industrie maquiladora est aussi appelée une « entreprise hirondelle » en Amérique Centrale. Seul un développement de la spécificité (unicité) des re ssources territoriales qu’elle emploie (main - d’ œuvre plus qualifiée, fournisseurs spécialisés, etc .) pour rait stabiliser ses activités da ns le territoire d’accueil. Or, l ’ entreprise multinationale , qui réalise une activité à faible marge de profit et dont la localisation optimale de la production dépend de la politique commerciale des Etats - Unis, voudr a conserver sa flexibilité de localisation . Cela lui permettra d’être capable de réagir rapidement à des changements dans la configuration des avantages de lo calisation. Cette stratégie s’oppose à l’intégration de s a filiale dans l’économie du territoire d’accueil et limite, par conséquent, son impact économique « qualitatif » (diffusion technologique, diversification du tissu productif, etc.)Postprint (published version

Can the maquiladora industry act as a catalyst for industrial development in Nicaragua? Some thoughts based on the study of Nien Hsing Textile Co.

Nicaragua, the poorest country of Central American, gives shelter to many foreign owned plants in its free trade zones (export processing zones). In December 2006, some 80.000 persons worked in these industrial zones. The great majority of these plants belong to the clothing industry and most of them are of Asian capital. But, does this maquiladora industry - an assembly industry of imported intermediate goods that benefits from a preferential tax and tariff treatment - contribute to a genuine industrial development of Nicaragua? This paper tries to give some elements of answer to this question by studying the evolution of a Taiwanese maquiladora enterprise assembling jeans and casual wear in Nicaragua: Nien Hsing Textile Co. Our study casts doubts on the contribution of such a foreign enterprise to the development of a perennial local industrial structure: there are no backward linkages, the Nicaraguan employees are not qualified and realise manual and routine tasks, and management is mostly composed of expatriates. Moreover, our comparison between the situation in 2007 and the one in 1998 shows us that there have no been significant changes: the enterprise remains an economic enclave manufacturing a basic or standardized garment whose permanence in the country still depends on specific trade policy advantages (with an expiry date) enjoyed by Nicaragua.Postprint (published version

L’entreprise maquiladora au Nicaragua: une « entreprise hirondelle »

Dans cette communication, nous tentons de développer une grille d’analyse qui présente les facteurs influençant la flexibilité « localisationnelle » d'une entreprise multinationale : la difficulté/facilité avec laquelle elle peut transférer son activité manufacturière d’un territoire d’accueil à un autre en réponse à un changement. Nous distinguons trois catégories de facteurs: (1) les avantages de localisation qu’offre le territoire d’accueil à l’entreprise multinationale (la nature (générique ou spécifique) des ressources territoriales utilisées par la filiale, le coût de celles-ci, l’accès à un marché offert par la production dans le territoire d’accueil) ; (2) les barrières à la sortie du territoire d’accueil (la durabilité et la spécificité des actifs détenus par l’entreprise multinationale dans le territoire d'accueil et d’autres obstacles qui entravent la sortie du territoire d’accueil) et (3) la disponibilité ou non d’autres établissements de l’entreprise multinationale qui peuvent reprendre la production de la filiale du territoire d’accueil. Une fois la grille présentée, nous l'utilisons pour analyser le potentiel de mobilité des activités d’une entreprise taïwanaise (Nien Hsing Textile Co.) qui confectionne des pantalons au Nicaragua (étude sur le terrain en 1998 et en 2007). L’étude montre comment cette entreprise, grâce à l’utilisation de biens d’équipement légers, l’emploi de ressources territoriales génériques (omniprésentes) et un contexte légal favorable, jouit d’une flexibilité « localisationnelle » élevée. Ce genre d’entreprise étrangère de l’industrie maquiladora est aussi appelée une « entreprise hirondelle » en Amérique Centrale. Seul un développement de la spécificité (unicité) des ressources territoriales qu’elle emploie (main-d’oeuvre plus qualifiée, fournisseurs spécialisés, etc.) pourrait stabiliser ses activités dans le territoire d’accueil. Or, l’entreprise multinationale, qui réalise une activité à faible marge de profit et dont la localisation optimale de la production dépend de la politique commerciale des Etats- Unis, voudra conserver sa flexibilité « localisationnelle ». Cela lui permettra d’être capable de réagir rapidement à des changements dans la configuration des avantages de localisation. Cette stratégie s’oppose à l’intégration de sa filiale dans l’économie du territoire d’accueil et limite, par conséquent, son impact économique « qualitatif » (diffusion technologique, diversification du tissu productif, etc.).Postprint (published version

Exploring the public's willingness to reduce air pollution and greenhouse gas emissions from private road transport in Catalonia

Internalizing environmental externalities is a market-driven approach to correcting people's private costs and benefits. One way of quantifying these externalities is estimating the willingness to pay (WTP) of people to reduce them. To better understand the determinants of this WTP, we use the Theory of Planned Behavior (TPB), which is a commonly used approach for predicting behavioral intentions. Our study focuses on air pollution and greenhouse gas (GHG) emissions from private road transport. We gathered survey data from 406 residents of Catalonia to explore the relationships among the psychological factors determining willingness to pay to quantify the mentioned externalities. We expanded the TPB by adding as antecedent Environmental Concern (EC) prior to the theory's three main factors (Attitude, Subjective Norms and Perceived Behavioral Control). Next, we used Structural Equation Modeling (SEM) to calculate an estimate of these externalities. The results of our study show that environmental concern is positively related to the three main factors of TPB. Our model accounts for most of the variation of WTP (R-squared is 94.7%). Our results also reveal that a majority of the respondents in Catalonia are willing to pay to reduce air pollution and GHG emissions from private road transportPeer ReviewedPostprint (author's final draft

Salud y mercado: algunos datos

En estos tiempos de austeridad presupuestaria, muchos piensan que nuestro sistema público de salud es demasiado caro (más de un tercio del total de los gastos de los presupuestos de la Generalitat de Catalunya en 2012). Se nos dice que nos hemos dotado de una asistencia sanitaria pública que no nos podemos permitir dado nuestro nivel de renta. Algunos creen que la solución más importante y general, puede venir de la privatización del sistema o del establecimiento de formas de gestión que acerquen la gestión pública de nuestra sanidad a formas privadas basadas en los indicadores que proporciona el mercado.Postprint (published version

¿Es la inversión extranjera directa manufacturera un motor de desarrollo económico? Reflexiones a partir del análisis de dos casos aparentemente diferentes

RESUMEN En este trabajo, intentamos, a partir del análisis de dos casos aparentemente muy diferentes entre si, una filial maquiladora taiwanesa del sector textil en Nicaragua y una filial manufacturera de Sony en el País de Gales, verificar la existencia de las ventajas atribuidas por muchos investigadores a la inversión extranjera directa manufacturera en las economías periféricas. Las similitudes negativas halladas en estos dos casos, nos lleva a tener dudas en lo que se refiere a la contribución supuestamente universal de dicha inversión al potencial de desarrollo a largo plazo de la economía de acogida. ABSTRACT Using the analysis of two apparently very different cases, a Taiwanese maquiladora subsidiary of the garment industry in Nicaragua and Sony’s manufacturing subsidiary in Wales, we try to verify the existence of the benefits attributed by many scholars to manufacturing foreign direct investment in the peripheral economies. The invalidating similarities found in the two cases cast doubts upon the supposedly universal contribution of this investment to the long-term development potential of the host economy. S e agradece el apoyo ofreciInversión extranjera directa, Desarrollo económico, Nicaragua, País de Gales, Textil-confección, Electrónica de consumo, Maquila

L'entreprise multinationale dans l'industrie maquiladora: un catalyseur de développement industriel ou une enclave? Réflexions à partir de l'étude d'une entreprise taïwanaise du secteur de l'habillement implantée au Nicaragua (1998-2007)

Le Nicaragua, le pays le plus pauvre d’ Amérique Centrale, accueille de nombreux établissements asiatiques (Taiwan, Corée du Sud et Hong Kong) du secteur de l’habillement dans ses zones franches industrielles d’exportation. La question que nous posons est si ces entreprises de l’industrie maquiladora – une industrie d’exportation qui bénéficie d’un traitement fiscal et tarifaire préférentiel – contribuent à déclencher un développement industriel durable du pays d’ac cueil. L’article tente d’apporter quelques éléments de réponse à cette question en étudiant l’évolution (1998-2007) des établissements nicaraguayens (employant, au total, environ 16.000 travailleurs en 2007) d’une entreprise taïwanaise.Peer ReviewedPostprint (published version