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Network composition, collaborative ties, and upgrading in emerging-market firms: Lessons from the Argentine autoparts sector

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Abstract

What types of relational and institutional mechanisms shape knowledge flows and the upgrading capabilities of emerging-market firms in the face of economic liberalization? We analyze the Argentine autoparts sector to distinguish the relative impact of different types of network relationships on a firm's process and product upgrading. A few social ties to international assemblers appear to be most beneficial for local suppliers, although they may be insufficient to compensate fully for the negative effect of being located in a lower tier. Supplier–customer relationships that are part of regular, disciplined discussions for product and process improvements appear to be especially beneficial for upgrading.

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Notes

  1. Some firms are located on the edge of the city of Buenos Aires, which borders the province of Buenos Aires. Practitioners view this as a single region, as firms are relatively close to one another.

  2. The Argentine government used three policy levers. First, it established a new Auto Regime that combined tax and tariff incentives with local content rules. Second, it reformed labor laws to increase labor flexibility. Third, Argentina and Brazil deepened trade within the Mercosur, which included specific agreements for the automotive industry to ensure tariff-free trade in vehicles and parts, and a common tariff barrier. Special provisions for common local content rules and balancing intra-industry trade would be phased out by 2000.

  3. Toyota would enter Argentina in 2000, and ramp up production after 2001. Hence the effects of Toyota are not captured in the aforementioned survey.

  4. Geography would be another factor. But since our sample includes firms for more or less the same region in Argentina, geographic distance is implicitly controlled in our study.

  5. It is worth noting that much of the evidence for these relationships has come from studies of Japanese assemblers and their suppliers. There were no Japanese OEMs in Argentina, until Toyota entered at the end of the 1990s.

  6. We utilized this measure instead of R&D expenditures since anecdotal evidence and analysis of the data in the sample reveal that in this sector small firms cannot allocate R&D expenditures easily, and usually under-report their investment.

  7. A full discussion of the data collection and survey methods can be found in Español et al. (2000). They note that the focal firm had the survey before the actual interview, and in the meantime the contact person in the firm collected data on different issues from the relevant employees of the firm.

  8. Complete separation occurs when there is a linear combination of the prediction variable such that whenever the combination is above 0 then the dependent variable is equal to 1, and when the combination is below 0 then the dependent variable is equal to 0. In our case, Process Development Assistance is a strong predictor of New Process.

  9. We want to thank an anonymous reviewer for making us aware of this issue, and for pointing us in this direction.

  10. Somewhat surprisingly, the variable for FDI is not significant, and often the sign is negative. We also ran models interacting FDI with the Linkages variables, but these were insignificant too. The literature offers several possible reasons, including buyers’ remorse and asymmetric information problems. This may also be an artifact of the data, as Ravi Ramamurti pointed out to us. In a context such as Argentina, the foreign-owned firms were the first to upgrade, and then lower-tier firms followed. In turn, by the time of the survey, foreign firms may not have recently undertaken big improvements.

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Acknowledgements

We are very grateful to Gustavo Lugones for the data and to AFAC for assistance with interviews; to the editor, Anand Swaminathan, and three anonymous referees for their guidance in fundamental improvements in the paper; to Managing Editor Anne Hoekman for her patience; to John Paul MacDuffie, Vit Henisz, and Bennet Zelner for their very helpful suggestions on previous iterations; and to Valentina Marano, Kristopher Deininger, Anant Nyshadham, and Maura Pape for research assistance. We also thank the IMVP, URF of the University of Pennsylvania, and Mack Center at Wharton for supporting our research. All errors and omissions are our own.

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  1. Sonoco International Business Department, The Darla Moore School of Business, University of South Carolina, Columbia, USA

    Gerald A McDermott

  2. Department of Management and Organization, Robert H. Smith School of Business, University of Maryland, College Park, USA

    Rafael A Corredoira

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  1. Gerald A McDermott
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Correspondence to Gerald A McDermott.

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Supplementary information accompanies the paper on the Journal of International Business Studies website ( www.palgrave-journals.com/jibs ).

Accepted by Anand Swaminathan, Area Ed itor, 14 September 2008. This paper has been with the authors for two revisions.

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McDermott, G., Corredoira, R. Network composition, collaborative ties, and upgrading in emerging-market firms: Lessons from the Argentine autoparts sector. J Int Bus Stud 41, 308–329 (2010). https://doi.org/10.1057/jibs.2009.7

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