We focus on the first two of these transformations. The combination of these three transformations has changed dramatically the international geography of production and innovation. Chandler and Cortada, 2000), enabling the same infrastructure to accommodate manipulation and transmission of voice, video, and data, has created new opportunities for organizational learning and knowledge exchange across organizational and national boundaries, hence magnifying the first two transformations (Ernst, 2002c). Third, a long-term process of “digital convergence” (e.g. Second, these networks have acted as a catalyst for international knowledge diffusion, providing new opportunities for local capability formation in lower-cost locations outside the industrial heartlands of North America, Western Europe and Japan. First, global production networks (GPN) have proliferated as a major organizational innovation in global operations (e.g. In response to the increasingly demanding requirements of global competition, three interrelated transformations have occurred in the organization of international economic transactions. Antonelli, 1992, Zander and Kogut, 1995) and a shift of market penetration strategies from established to new and unknown markets (e.g. Flaherty, 1986) learning and the acquisition of specialized external capabilities (e.g. Kogut, 1985, Kogut and Kulatilaka, 1994) a compression of speed-to-market through reduced product development and product life cycles (e.g. While both market access and cost reductions remain important, it became clear that they have to be reconciled with a number of equally important requirements that encompass: the exploitation of uncertainty through improved operational flexibility (e.g. Dicken, 1992).Ī progressive liberalization and deregulation of international trade and investment, and the rapid development and diffusion of information and communication technology (IT) have fundamentally changed the global competitive dynamics, in which MNCs operate. This has given rise to a peculiar pattern of international production: offshore production sites in low-cost locations are linked through triangular trade with the major markets in North America and Europe (e.g. Until recently, their international production has focused on the penetration of protected markets through tariff-hopping investments, and on the use of assets developed at home to exploit international factor cost differentials, primarily for labor (e.g. Multinational corporations (MNCs) have been around for a long time (e.g.
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