Inter-firm Collaboration in Us Manufacturing

It is commonly agreed that the landscape of US (and international) manufacturing has changed significantly since the 1970s. The fragmentation of once-predictable mass markets rocked the Fordist order, with dramatic effects on corporate structure and divisions of labor within and between firms. Original equipment manufacturers (OEMs) now produce a greater variety of more customized products with shifting technology mixes. ‘‘Globalization’’ and the opening up of national markets allow OEMs to acquire inputs virtually anywhere, but also subject them to more direct competition at home, as well as to the increased uncertainties of exchange rate and raw material price fluctuations. In many key end-user industries—including automobiles and other transportation equipment; industrial, farm, and construction machinery; and electrical appliances—OEMs have seen years of relative stability in their core technologies (steel and mechanical engineering) shaken by the incorporation of innovations developed in other sectors, such as new materials and electronics. Many of these large firms have actively engaged with this new environment by retrenching to their ‘‘core competencies’’ in design, marketing, and assembly, and electing to ‘‘outsource’’ other activities to a series of smaller suppliers who now do much of the ‘‘real’’ manufacturing of components. These firms now often find themselves operating simultaneously in the supply chains of several relatively disparate end-user industries. The shift to a more decentralized organization of production in US manufacturing is easily seen in the changing distribution of workers across factories: between 1972 and 1992, plants with 500ò employees shed 3 million workers, while plants employing fewer than 500 added 2 million (Luria 2000). Outsourcing is often viewed as an attempt by OEMs to shift costs to the weak, to avoid unions, and generally to decrease the wage bill. Wage-cost driven outsourcing is a particular problem in the US context (especially in the automobile industry), given the large union/non-union wage differentials, plant-level bargaining, the many southern ‘‘right-to-work’’ states with lower union density, and the dramatically reduced wage costs and compliant unions just across the Mexican border. However, while labor costs are undoubtedly important in many cases, they provide at best a partial explanation (Deavers 1997). In perhaps the most systematic quantitative study of