Geographical Proximity and Supplying Relationship in Modular Production

Although the theoretical debate concerning firms' boundaries is far from resolved, the empirical shape of the firm has been largely redefined over the past two decades. Companies have focused on their 'core competencies'. This specialisation research has caused a trend towards vertical disintegration leading to a reorganisation of the value chain (Porter, 1990). More specifically, empirical survey has demonstrated that outsourcing has been accompanied by an increase in the number of responsibilities that are being delegated to upstream firms (European Commission, 1997). One of the issues involved in this extension of suppliers' area of responsibility along the supply chain is the articulation of inter-firm activities. In fact, this break with a system in which relationships were dominated by subcontracting, or by the actions of whatever firm was acting as principal, has created an increased need for cooperation (Richardson, 1972). Firms have had to learn to coordinate increasingly complex flows of information and products so as to ensure that products 'fit' processes. At the same time, these same firms are trying to find a stable compromise allowing them to share relational quasi-rents (Asanuma, 1989)-whose potential value rises along with the increases in the value-added that is underlying the exchange. One of the issues that requires resolution is the spatial dimension of inter-firm coordination. Past analyses of Toyotaism have emphasised the importance of supplying relations for the competitiveness of the Japanese automotive industry. In this analysis, the spatial dimension of the original production system founded by Toyota has in and of itself becomes a research topic. Questions concerning the relationship between geographic proximity and the techniques of Just-in-Time (JIT) have sparked a debate between observers whose analyses have been diverse, and The purpose of the present article is to pursue this discussion by analysing those recent developments in the automotive industry that have involved what is termed 'modular production'. Two major experiments have lent themselves to much debate: Volkswagen's truck assembly plant in Resende (Brazil), and the new facilities that