Tales From the 'Global' Economy: Cross National Production Networks and the Re-organization of the European Economy
Year: 1996
Type: preprint
Abstract: Table of Contents1.The Regional and National Foundations of a Global Economy 2. Cross-National Production Networks and The Third Tier of Asian Development 3. Cross National Production Networks and The Reorganization of The European Region 4. Conclusion 5. Endnotes This essay develops the optic of Asian cross-national production networks to provide an alternative perspective on the story of the economic transition of the former communist countries and as a means to examine the character of integration of Central and Eastern Europe into the broader European economy.East Asia is the regional case that we use to illustrate how cross-national production networks operate in practice and their implications for countries integrating now into the world economy.These networks have emerged as part of a reorganization of competition and production best characterized as "Intelism".(1) The discussion begins from the vantage that the foundations of the new "global" economy remain national.National models of growth in the advanced countries are not collapsing, but rather they are undergoing a transition along distinct trajectories.Government is not much being squeezed out of the economy, but rather the points of its leverage are shifting.(2) At the same time the emerging "global" geography will be regional.That three regional economic groups exist is not in dispute, but what the character of the political and economic relations among the three regions is and will become is contested.Will, for example, an open liberal regionalism develop or will the economic groups take on the character of rival political blocs?(3) These stories are connected: national developments and regional trajectories will be inter-tangled.Indeed, one organizing proposition of the essay is that national developments--expressed variously as the distinct capacities of the entire economy to sustain productivity increases, as the distinct technological capabilities and trajectories, and as nationally distinctive firm approaches to market strategy and production organization--must be situated in the context of a home region's market dynamics and political relations.The notion is that the regional context, a regionally defined set of constraints and possibilities, sets distinctive tasks and solutions--hence encourage specific routes for economic development.We specify that context using a series of concepts.The "Regional Architecture" is the institutional house built up around the bare bones of power relations.(4) That institutional house is constructed with both political/security arrangements and economic institutions.That architecture, together with a more traditional notion of industrial organization, represents a "Regional Framework of Incentives and Constraints" that confronts economic actors.The interplay of the actors within the "Framework" creates in its turn a distinct market "logic" or dynamic.Just as the distinct structure of national political economies produces distinct patterns of political behavior and economic development that can be usefully compared, so do variations in regional architectures, frameworks, and dynamics.(5) This essay suggests that developments in one region, Asia, serve as a means to understand developments in another region, Europe.The changing European Regional Architecture suggests a new "Framework" that may induce cross-national production networks of the form observed in Asia.Significant features of the present European situation are clarified by looking through a comparative regional lens.Part I of the paper sketches our interpretation of the emerging "global" economy as a story of regions, nationally rooted corporations, and the changing terms of competition and development characterized as "Intelism".Part II specifies the Asian architecture and develops the optic of cross-national production networks that have emerged in Asia as distinguishing features of many corporate strategies and third tier Asian development policies.(6) An analysis of cross-national production networks is ineluctably the tale of that entire region's trajectory of industrial development.Part III proposes that as Europe's Regional Architecture has changed.The resulting shifts in the " framework of constraints and possibilities" opens the possibility that the market dynamics typical of the Asian region will emerge in Europe.Those possibilities, in our view, are not easily evident either in an examination of the Eastern transition or the present developments of Western Europe.Rather they are best and perhaps only discovered in a comparative regional perspective.The optic of cross-national production networks provides an alternative perspective on the story of East European economic transition to that of the literature on Central/Eastern European firm-building and state-building. The Regional and National Foundations of a Global Economy"Globalism" has become an emblem of dramatic changes in the international economy.The international economy has changed, there is no doubt.But a borderless world in which money, companies, product and technology move freely is for tomorrow, and indeed it is not evident when that tomorrow will be.The suddenly pervasive intrusion of the notion of "globalism" reflects the effort of governments and companies to apply a label to a diverse package of changes that they find difficult to understand and to justify strategies to adjust to a new economic world they cannot clearly specify.The fact of expanding market ties is not itself in question; at issue is the character of those ties, the pattern they form, and their significance.The competing versions of the globalism story, or the particular tales told about its features, in fact dispute what the core features of the emerging economy are.Let us identify the core elements of the new pattern as we see it.First, measures abound of expanding market interconnections in the form of investment, financial networks and trade.While the intensity of interconnection, the volumes of trade and investment set against GDP, have grown dramatically since World War II, we are now only returning to the "intensities" of 1914 after the disruptions of two World Wars and a trade shrinking Great Depression.(7) Noting that we are only now returning to earlier intensities guards against the hyperbole of many discussions of the "new global economy".(8) Nonetheless 1996 is, quite evidently, a very different era than 1914 and the character of the economic connections among countries and firms in 1914 and 1996 are quite different as well.Foreign Direct Investment grows up alongside Portfolio Investments, and portfolio investments become more diverse and connected in new ways.The scale of wholesale global financial markets now matches in significance that of national financial markets, though they differ in form and purpose, thereby changing the relation between global financial transactions and national financial markets."Globalization" as the code word for the present era must then be distinguished clearly from the code words of earlier eras, internationalization and multinationalization. (9) International firms sold abroad.They were distinguished from multinational corporations that produced abroad in a variety of locations.The British era of industrial pre-eminence was one of trade; the American era by contrast has been one of direct foreign investment.Internationalization and multinationalization had in common two things: first, the spread of a single dominant style of production organization out from a single dominant core country, and second, the imitation by foreign countries of the advances emanating from that core.In each case--internationalization and multinationalization--a single pre-eminent industrial power projected its industrial power abroad and other countries struggled to imitate and adapt.Second, diversity and uncertain objectives gives this current era, whatever its label, a distinct logic and feel.(10) It is a world economy of multiple centers.It is not just that the terms of corporate competition have been altered; but rather that a multiplicity and competition of corporate and national strategies to capture advantage in shifting markets characterizes this "global" era.Price, quality, speed, and differentiation all mark the new phase of corporate competition.Speed to market, corporate downsizing, networked automation and network design for manufacturing, software based advantage are all code words themselves that point to different elements in a search for new strategies.Indeed, in the auto industry, competition remains centrally a battle among final product design/ integrators /assemblers such as Toyota, GM, and Renault.But in electronics the fight is more diverse.Component firms such as Intel that control distinctive technologies often define the terms of competition and the pace of technological advance, not the assemblers such as Compaq or Gateway or even now, IBM in most segments.Within particular component sectors multiple bets, strategies, are possible.Even as Intel drives forward its dominant microprocessor line, the Koreans bet on billion dollar semiconductor fab facilities for memory and more generally on the giant Chaebol and scale production; while the Taiwanese bet on smaller firms and network management of mid-technology.Distinctive electronics architectures, not the same thing as product design, become a central instrument of competition for companies such as Apple, and later Sun and Silicon Graphics.(11) The variety is deeply rooted.Fundamentally, the character of competition is shifting, and it is not simply a matter of the emergence of software, of the Virtual Corporation, or the reorganization of production labeled post-Fordist manufacturing.Let us trace the confusion for a moment.Up until the last few decades there was a volume mass production strategy that in the earlier part of this century became the emblem of "modern times" and which all tried to emu
Authors: John Zysman, Eileen M. Doherty, Andrew Schwartz
Language: English
Subfield: Strategy and Management
Domain: Social Sciences
Open Access status: green
OpenAlex ID: W3123069924