The Changing Firm and Country Boundaries of US Manufacturers in Global Value Chains
Journal of Economic Perspectives
vol. 37,
no. 3, Summer 2023
(pp. 31-58)
(Complimentary)
Abstract
This paper documents how US firms organize goods production across firm and country boundaries. Most US firms that perform physical transformation tasks in-house using foreign manufacturing plants in 2007 also own US manufacturing plants; moreover, manufacturing comprises their main domestic activity. By contrast, "factoryless goods producers" outsource all physical transformation tasks to arm's-length contractors, focusing their in-house efforts on design and marketing. This distinct firm type is missing from standard analyses of manufacturing, growing in importance, and increasingly reliant on foreign suppliers. Physical transformation "within-the-firm" thus coincides with substantial physical transformation "within-the-country," whereas its performance "outside-the-firm" often also implies "outside-the-country." Despite these differences, factoryless goods producers and firms with foreign and domestic manufacturing plants both employ relatively high shares of US knowledge workers. These patterns call for new models and data to capture the potential for foreign production to support domestic innovation, which US firms leverage around the world.Citation
Fort, Teresa C. 2023. "The Changing Firm and Country Boundaries of US Manufacturers in Global Value Chains." Journal of Economic Perspectives, 37 (3): 31-58. DOI: 10.1257/jep.37.3.31Additional Materials
JEL Classification
- D22 Firm Behavior: Empirical Analysis
- F23 Multinational Firms; International Business
- L14 Transactional Relationships; Contracts and Reputation; Networks
- L24 Contracting Out; Joint Ventures; Technology Licensing
- L60 Industry Studies: Manufacturing: General
- O31 Innovation and Invention: Processes and Incentives
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