Design for Location: The Impact of Manufacturing Offshore on Technology Competitiveness in the Optoelectronics Industry
Management Science, Vol. 56, No. 12, pp. 2323-2349
27 Pages Posted: 31 Jan 2010 Last revised: 19 Oct 2013
Date Written: January 30, 2010
Abstract
This paper presents a case study of the impact of manufacturing offshore on technology competitiveness in the optoelectronics industry. It examines a critical design/facility location decision being faced by optoelectronic component manufacturers. The paper uses a combination of simulation modeling and empirical data to demonstrate the economic constraints facing these firms. The results show that production location changes the relative production economics of the two competing designs – one emerging, one prevailing – that are currently perfect substitutes for each other on the telecom market, but not necessarily perfect substitutes in other markets in the long term. Specifically, if optoelectronic component firms shift production from the U.S. to countries in developing East Asia, the emerging designs that were developed in the U.S. no longer pay. Production characteristics are different abroad, and the prevailing design can be more cost-effective in developing country production environments.The emerging designs, however, have performance characteristics that may be valuable in the long term to the larger computing market and to pushing forward Moore’s Law. The paper concludes by exploring the dilemma this creates for the optoelectronic component manufacturers, and recommending a framework based on which the results may be generalized to other industries.
Keywords: International, Product Development, Design for Manufacturing
Suggested Citation: Suggested Citation
Do you want regular updates from SSRN on Twitter?
Recommended Papers
-
The Resurgence of Growth in the Late 1990s: Is Information Technology the Story?
-
Does the "New Economy" Measure Up to the Great Inventions of the Past?
-
Information Technology and the World Economy
By Dale W. Jorgenson and Khuong Vu
-
Energy Efficiency, User Cost Changes, and the Measurement of Durable Goods Prices
-
Information Technology and the U.S. Productivity Revival: What Do the Industry Data Say?
-
Computing Productivity: Firm-Level Evidence
By Erik Brynjolfsson and Lorin M. Hitt
-
Economic Growth in the OECD Area: Recent Trends at the Aggregate and Sectoral Level
By Stefano Scarpetta, Andrea Bassanini, ...