Many goods we consume have components manufactured in several different countries. Pol Antras examines the contractual frictions that arise in the international system of production and how these frictions influence the world economy. Prominent among these features is the fact that parts and components are frequently customized to the needs of their intended buyers remember our earlier example with the iPad 3. I am also very grateful to the Bank of Spain for generously funding my research at that crucial early stage. These figures illustrate the importance of multinational firms for U. The music I listened to and the movies I watched were mostly British or American. With this book, his thinking about multinationals and offshoring is finally available to a wider audience.
If the court is not familiar with the law specified in the contract, as may often occur in international transactions, the court might decide to rule on the basis of its own law, or may inadvertently apply the desired foreign law incorrectly. On the other hand, in that same year the share of intrafirm trade reached a record 89. In a cross-section of countries U. Although Apple does not disclose detailed information on its input providers, a clear picture of the global nature of the iPad 3 production process emerges when combining information from teardown reports such as those published by isuppli. Global Production: Firms, Contracts, and Trade. Unfortunately, this is not the world we or at least, I live in. Many firms organize global production around offshoring parts, components, and services to producers in distant countries, and contracts are drawn up specific to the parties and distinct legal systems involved.
Some readers might be asking themselves at this point: why should one care about the boundaries of multinational firms? Few international trade transactions today are based on the exchange of finished goods; rather, the majority of transactions are dominated by sales of individual components and intermediary services. Related-Party Trade data collected by the U. The volume is brimming with humor, lively anecdotes, philosophical musings, and other insights that could not possibly be outsourced to China. Customs and Census Offices, which demonstrate the relevance of contractual factors in global production decisions. ¹³ Another attempt to ameliorate the perceived contractibility of international transactions consists in resorting to international arbitration. Antràs discusses the inevitable complications that develop in contract negotiation and execution.
The Data Appendix contains a lengthier discussion of the construction of this index. These changes largely stemmed from the fall of communism in Eastern Europe and the former Soviet Union, but also from an ensuing ideological shift to the right in large parts of the globe. Summary Global Production is the first book to provide a fully comprehensive overview of the complicated issues facing multinational companies and their global sourcing strategies. In this lucid, comprehensive, and fascinating book, Antràs applies modern contract theory to help us understand the internationalization and location decisions of multinational firms. This is not because these models assume perfect competition, constant returns to scale, or homogeneous goods.
Indeed, if firms could foresee all possible future contingencies, and if they could costlessly write contracts that specify in an enforceable manner the course of action to be taken in all of these possible contingencies, then firms would no longer need to worry about controlling the workers, the internal divisions, or the supplying firms with whom they interact in production. Customs and Census Offices, which demonstrate the relevance of contractual factors in global production decisions. Although a significant share of the observed increase in upstreamness is related to an increase the relative weight of petroleum-related industries, even when netting those out, one observes a significant upward trend in upstreamness see Figure 1. I have found that between four and five 90-minute lectures are generally sufficient to cover the contents of this book. It will also serve as a reference for scholars in the international trade field and beyond. Graduate students and researchers will find themselves transported right to the research frontier.
Antras discusses the inevitable complications that develop in contract negotiation and execution. ¹¹ As insightful as this body of work has proven to be, it seems clear that modeling global production sharing as simply an increase in the tradability of homogeneous inputs across countries misses important characteristics of intermediate input trade. What has changed since 1994? A second difficulty relates to the fact that even when local courts are competent in a legal sense , judges may be reluctant to rule on a contract dispute involving residents of foreign countries, especially if such a ruling would entail an unfavorable outcome for local residents. We shall briefly develop this idea in Chapter 3. I have attempted, however, to make the style of the book a bit less terse than is standard in professional journals and graduate-level textbooks. The evidence on the home bias of local courts is mixed, but even those authors advocating that a formal analysis of case law does not support the hypothesis of biases against foreigners readily admit a widespread belief of the existence of such xenophobic biases see Clermont and Eisenberg, 2007. The E-mail message field is required.
He provides a unified framework that sheds light on the factors helping global firms determine production locations and other organizational choices. In some circumstances, however, the lack of contract enforceability might turn firms to independent suppliers for the procurement of parts precisely because such an arrangement might elicit the best performance from foreign producers. Series Title: Responsibility: Pol Antràs. A739 2016 382—dc23 2015017240 This book has been composed in Linux Libertine Printed on acid-free paper. He provides a unified framework that sheds light on the factors helping global firms determine production locations and other organizational choices. ² Third, political developments in the world have brought about a remarkable increase in the share of world population actively participating in the process of globalization.
Global Production is the first book Firms, Contracts, and Trade Structure He provides a unified framework that sheds light on the factors helping global firms. Pol Antràs examines the contractual frictions that arise in the international system of production and how these frictions influence the world economy. The typical Made in labels in manufactured goods have become archaic symbols of an old era. As shown in Figure 1. Global Production: Firms, Contracts, and Trade Structure Now available through Princeton University Press. It is also relatively quick and parties benefit from the fact that arbitrators tend to have more commercial expertise than a typical judge. In other words, and as Coase 1937 anticipated more than seventy-five years ago, firm boundaries are indeterminate in a world of complete contracts.