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• W154594732 abstract "List of AcronymsCPU central processing unitGDP gross domestic productGPN global production networkHP Hewlett-PackardMNC multinational corporationPC personal computerR&D research and developmentVAT value added taxVMI vendor managed inventoryExecutive SummaryIn this issue, a case study of the notebook personal computer (PC) industry in China is used to reexamine the concept of the industry. As labor costs rose dramatically in the coastal areas of China where production has been concentrated, contract manufacturers attempted to move their factories to the inner provinces of China, in response to incentives from the host regions' governments. However, they encountered immense difficulties in recruiting labor and managing supply chains in the new locations, despite the generous support offered by the local governments. The experience highlights the important role of labor instimtions in which global production networks (GPNs) are embedded. Labor instimtions and GPNs are interdependent and coevolving. Unique Chinese labor instimtions have reshaped the structure of GPNs of the notebook PC industry, which was brought to China by multinational corporations (MNCs) in the 1990s. Because the labor instimtions of the coastal areas cannot be replicated in the inner provinces, it is difficult to relocate the production there. This makes a footloose industry like the notebook PC industry not so loose anymore.The traditional argument that labor-intensive industries operated by MNCs are footloose is based on the assumption that labor is homoge-neous and location-bound, while capital is perfectly mobile. Therefore, capital moves freely to exploit location-bound labor. This assumption is untrue, as labor is mostly heterogeneous and potentially mobile. This case study shows that even when labor is homogeneous, which may be close to reality in the case of unskilled workers, the sheer size of the labor pool still makes a difference. Moreover, the mobility of labor, which can be controlled by migration policy and related labor market regulations, also matters. The quantity of labor affects the scale of production, which, in turn, affects the organization of production along the value chains and the power structure of GPNs. The mobility of labor affects the internal organization of work within the firm. When both the interand intra-firm organization of production are conditional on local labor institutions, it is not easy for the production activities to be relocated.Labor institutions found only in the coastal areas of China have significantly reduced the number of players in the GPNs, making the notebook PC industry more concentrated than before. Both the number of contract manufacturers and their first-tier suppliers have significantly decreased, and the power structure of the GPNs has shifted in favor of the contract manufacturers. Along with the shrinking number of players, production has become more vertically integrated, and the alliances between the contract manufacturers and their suppliers have been strengthened. As a result, the contract manufacturers have had more power in making location decisions, and they respond to local government incentives. However, as GPNs are deeply embedded in local institutions, relocation entails a search for the right local government that is willing and able to create the right institutions to accommodate the new GPN structures. Because a perfect replication of local institutions is difficult, a wholesale relocation of GPNs from one place to another is also implausible. A good coupling of GPNs with local institutions is a precondition for global factories to function. This presents a big challenge to the concept of the footloose industry, which implies that the industry can move without friction.Once rising labor costs affected the coastal areas of China, there is no doubt that the region lost its location advantage in hosting the global factories. …" @default.
• W154594732 created "2016-06-24" @default.
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• W154594732 date "2013-04-26" @default.
• W154594732 modified "2023-09-27" @default.
• W154594732 title "How Mobile Is the Footloose Industry? The Case of the Notebook PC Industry in China" @default.
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