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Is There a Trend Towards Global Value Chain Specialization? An Examination of Cross Border Sales of US Foreign Affiliates

SMG Working Paper No. 24/2008

57 Pages Posted: 29 Jul 2008  

Sjoerd Beugelsdijk

University of Groningen

Torben Pedersen

Copenhagen Business School - Department of Strategic Management and Globalization

Björn Preuss

Copenhagen Business School

Date Written: July 29, 2008

Abstract

Abstract: In this study we discuss and empirically test the assertion that over the last two decades multinational enterprises' (MNEs') configuration of value-adding activities has shifted from a sparse and simple (host-home) international division of labor among the foreign affiliates to a more specialized and 'advanced' global value chain configuration in which MNEs locate fine-sliced parts of the value chain at the most efficient locations. Using data on trade flows of U.S. affiliates in 56 host countries between 1983 and 2003 we find some indications of a trend in the direction of global value chain specialization. In particular among US affiliates in developing countries the proportion of host-host, intra-firm trade has increased significantly during the observed period of time. Conversely, the proportion of host-home and inter-firm trade has diminished. We interpret this as indicating both value chain disaggregation (vertical specialization) and MNEs' systematic exploitation of factor cost differentials across countries. We also find that the absolute levels of all types of trade flows have increased. Hence, it is the relative, and not the absolute, changes in the trade flow patterns of US affiliates that gives credibility to the global value chain assertion.

Keywords: FDI, US affiliate sales, globalization, value chain specialization

Suggested Citation

Beugelsdijk, Sjoerd and Pedersen, Torben and Preuss, Björn, Is There a Trend Towards Global Value Chain Specialization? An Examination of Cross Border Sales of US Foreign Affiliates (July 29, 2008). SMG Working Paper No. 24/2008. Available at SSRN: https://ssrn.com/abstract=1184902 or http://dx.doi.org/10.2139/ssrn.1184902

Sjoerd Beugelsdijk

University of Groningen ( email )

P.O. Box 800
9700 AH Groningen
Netherlands

Torben Pedersen (Contact Author)

Copenhagen Business School - Department of Strategic Management and Globalization ( email )

Porcelænshaven 24
Frederiksberg, 2000
Denmark
+45 3815 3030 (Phone)
+45 3815 3035 (Fax)

HOME PAGE: http://www.cbs.dk/staff/tp

Björn Preuss

Copenhagen Business School ( email )

Solbjerg Plads 3
Frederiksberg C, DK - 2000
Denmark

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