The Changing Firm and Country Boundaries of US Manufacturers in Global Value Chains

Teresa C. Fort

Journal of Economic Perspectives, 2023, vol. 37, issue 3, 31-58

Abstract: This paper documents how US firms organize goods production across firm and country boundaries. Most US firms that perform physical transformation tasks in-house using foreign manufacturing plants in 2007 also own US manufacturing plants; moreover, manufacturing comprises their main domestic activity. By contrast, "factoryless goods producers" outsource all physical transformation tasks to arm's-length contractors, focusing their in-house efforts on design and marketing. This distinct firm type is missing from standard analyses of manufacturing, growing in importance, and increasingly reliant on foreign suppliers. Physical transformation "within-the-firm" thus coincides with substantial physical transformation "within-the-country," whereas its performance "outside-the-firm" often also implies "outside-the-country." Despite these differences, factoryless goods producers and firms with foreign and domestic manufacturing plants both employ relatively high shares of US knowledge workers. These patterns call for new models and data to capture the potential for foreign production to support domestic innovation, which US firms leverage around the world.

JEL-codes: D22 F23 L14 L24 L60 O31 (search for similar items in EconPapers)
Date: 2023
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Citations: View citations in EconPapers (4)

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DOI: 10.1257/jep.37.3.31

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