The spatial structure of production/distribution networks and its implication for technology transfers and spillovers

8. The spatial structure of production/ distribution networks and its implication for technology transfers and spillovers Fukunari Kimura FIRM HETEROGENEITY, THE SPATIAL STRUCTURE OF NETWORKS, AND TECHNOLOGY SPILLOVERS 8.1 Multinational firms (MNEs) play a primary role in the formation of international production/distribution networks. Typically, one firm or a small number of MNEs either upstream or downstream of a value chain deliberately design, operate and manage a network of production and distribution with production-process-wise international division of labor. In this process, MNEs exploit various opportunities to establish relations with other firms, including those in less-developed countries (LDCs). The firm-specific nature and characteristics are thus naturally influenced in the process of network formation. As a result, there is a wide variety of production/distribution networks, even in the same industry or in the same product line. Firm heterogeneity is an essential basis of international production/distribution networks. The sophisticated combination of intra-firm and arm’s-length (interfirm) transactions in production/distribution networks links with the recent proliferation of various business models. Until the 1980s, the most admired companies were giant MNEs, such as IBM, with intra-firm total integration of value chains from upstream to downstream. However, this type of giant total integration model has been critically reviewed since the 1990s. Currently, firms are trying to enhance their productivity and profitability by concentrating their resources on their core competences and outsourcing other tasks to other firms.1 The formation of international production/distribution networks in East Asia has advanced together with the innovative construction of inter-firm relationships. 158 The spatial….