Outsourcing and International Production of a Multinational: A Theoretical Model and Empirical Evidence from Toyota, Thailand

A stylised partial equilibrium model of an MNC is developed. The model incorporates key aspects of outsourcing in a world of falling trade costs. The multinational, with firm-specific capital operates in two countries that differ in factor prices; it produces final goods with firm specific capital but can source multiple intermediate goods internally from each subsidiary (produced with firm-specific capital and labour), or outsource them from domestic or foreign suppliers. There is a potential trade off between scale of final good production and scope of in-house component production. Trade liberalization can affect both country and organization choices of the firm’s component sourcing and final-good production. We also use a previously unused data set on component trade of Toyota in Southeast Asia to conduct an empirical investigation informed by the model insights.Intra-firm Trade, Trade in intermediate inputs, direct foreign investment, multinational corporations and outsourcing

India: A New Player in Asian Production Networks?, Studies in Trade and Investment 75

This chapter undertakes a comparative analysis between China and India, with a view to understanding the divergence in the performances of the two countries. Chapter II begins with a comparative overview of the differences in the economic structures of the two countries, followed by a detailed examination of the roles of the two countries in the current landscape of Asian IPNsproduction network, fragmentation of production, Asia, value chain, China, India, globalization, FDI, GDP, manufacturing exports, intraregional trade

India: A New Player in Asian Production Networks?, Studies in Trade and Investment 75

Chapter I of this study presents a brief review of the appearance and expansion of the Asian IPN phenomenon, followed by a literature survey that explores key drivers of this phenomenon from theoretical perspectives. Theories point to important conditions that countries must meet in order to be successfully integrated into IPNs. These conditions highlight policy implications for creating trade and investment climates that are favourable to IPN development.production network, fragmentation of production, Asia, value chain, India manufacturing sector, China, India, offshoring, MNCs, FDI, Asian IPN

India: A New Player in Asian Production Networks?, Studies in Trade and Investment 75

While the IPN phenomenon has accelerated trade and investment linkages between countries in East and South-East Asia, the remainder of the region has not matched those countries in this process. The objective of this study is to explore the reasons for this by using India’s performance in the Asian IPNs as a case study for other countries that are trailing behind in this area. The study seeks to identify the reasons why India has performed below its potential in this new form of international division of labour, even though that country possess several supportive factors including: (a) the sheer size of the economy and population; (b) a large pool of engineers; (c) relatively sound intellectual property protection; and (d) an increasingly open trade and investment climate resulting from progressive economic reforms.production network, fragmentation of production, Asia, value chain, India manufacturing sector, China, India, Offshoring, MNCs, FDI