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A Theory of Modular Production Networks

Ari Van Assche
University of California, Davis

May 2004

Abstract:
In many globalized industries, the recent wave of vertical outsourcing seems to have co-evolved with increased horizontal consolidation in the component sector. To account for this phenomenon, I build an industry-equilibrium model in which the boundaries of the firm are endogenous in both the horizontal and vertical dimensions of international production. The concept of modularity is subsequently incorporated into the model. The model not only links the co-evolution to modularity, but also predicts the emergence of de facto input standardization during this process.

Keywords: Product modularity, vertical outsourcing, horizontal consolidation, standardization

JEL Classifications: F23, F12, L22

Working Paper Series

Date posted: September 13, 2004 ; Last revised: May 06, 2005

Suggested Citation

Van Assche, Ari, A Theory of Modular Production Networks (May 2004). Available at SSRN: http://ssrn.com/abstract=588904

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Contact Information

Ari Van Assche (Contact Author)

University of California, Davis ( email )

One Shields Avenue
Davis, CA 95616
United States