Working Paper: NBER ID: w31319
Authors: Teresa C. Fort
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.
Keywords: U.S. manufacturing; global value chains; physical transformation; factoryless goods producers; multinational enterprises
JEL Codes: F1; L2; L6
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| foreign production capabilities (F23) | domestic manufacturing operations (L69) |
| outsourcing all physical transformation tasks (L24) | domestic innovation (O39) |
| global manufacturing presence (L60) | domestic innovation (O39) |
| integration of foreign production (F23) | domestic innovation (O39) |