John Sargent

Skill development and integrated manufacturing in Mexico

Abstract This paper examines the contribution to worker skill development made by transnational companies (TNCs) in Mexico. We test to determine if firms that have implemented any or all parts of the integrated manufacturing model (defined as the use of advanced manufacturing technology, just in time inventory practices, and total quality management) are more likely to make significant skill development contributions than firms that do not use these practices. Our primary finding is that TNCs with intensive total quality management practices tend to make above average contributions. We found no significant statistical relationship between advanced manufacturing technology and skill development.

Combining Export Processing Zones and Regional Free Trade Agreements: Lessons From the Mexican Experience

Abstract Export processing zones (EPZs) and regional trade agreements are two common initiatives utilized by developing country governments in order to increase the wealth creation effects of todays international trade and investment system. In this paper, we argue that these two initiatives are driven by somewhat incompatible economic rationales. Based on the North American experiment in combining a major EPZ (Mexicos maquiladoras) within the terms of a regional free trade agreement (the North American Free Trade Agreement), we test to determine whether the logic of a regional integration initiative or that of the EPZ is dominate. Our results suggest that the competitive dynamics of Mexicos EPZ industry have not been fundamentally altered by NAFTAs regional incentives. We conclude with recommendations for policy makers in other developing countries that might be considering attempting to impose regional development schemes on the large and politically powerfully TNCs that tend to dominate the global EPZ industry.

International Success of Business Groups as an Indicator of National Competitiveness: The Mexican Example

Abstract Business groups are the dominant form of large private enterprise throughout Latin America. However, relatively little academic research has attempted to identify the dominant characteristics of these groups and even fewer formal studies have examined how these groups are fairing in todays age of increased competition and globalization. While there are numerous characteristics of business groups that are worthy of examination, in this paper we focus on their foreign direct investment (FDI) activities. In order to better understand the potential strengths and weaknesses of Mexican multinationals, we draw upon Dunnings eclectic paradigm of international production and the literature examining developing country multinationals. While this body of knowledge provides a useful theoretical lens, the current FDI activity of Mexican business groups is somewhat at odds with the existing literature.

Maquiladoras and Skill Development

This paper examines the contribution of different segments of the maquiladora industry to the development of industrial skills in Mexico. Using data collected through interviews at 30 maquiladoras and with 59 line and technical workers, the relationship among process technology, Japanese manufacturing techniques, and human resource practices is explored. The results suggest that large maquiladoras that utilize technologically-intensive process technology and that do some manufacturing do not have significantly more attractive human resource programs than large assembly maquiladoras that use relatively simple process technology. The primary conclusion from this study is that the growth of skills development activity in the maquiladoras is best explained by the rapid growth of the transportation equipment industry over the last 15 years and not to growth of technologically-intensive forms of production.

Large Firms and Business Groups in Latin America: Towards a Theory Based, Contextually Relevant Research Agenda

ABSTRACT Large firms play an essential role in national competitiveness and economic development. With a goal of establishing a research agenda that is both well grounded in relevant theory and that addresses important challenges facing the region, in this paper we examine the organization and operation of large, privately owned firms in Latin America. As has been the case since at least the end of the 19th century, studies have found that Latin American firms are organized into business groups and continue to be owned and managed by families. We probe into the strengths and weaknesses of the Latin American version of business organization, including how groups are financed, their efforts to partner and/or compete with industrialized country multinationals (MNCs), and their chances of success in a global economy. Relying on recent advances in agency and institutional theory, we then develop a number of research propositions and suggestions for future research. RESUMEN. Grandes empresas juegan un papel esencial en el desarrollo económico y logro de la competitividad nacional. En este estudio examinamos la organización y operación de grandes empresas privadas latinoamericanas, con el propósito de establecer una agenda de investigación profundamente arraigada en importantes datos teóricos y enfocando, concomitantemente, los relevantes retos que enfrenta la región. Tal cual ocurre por lo menos desde fines del siglo XIX, los estudios realizados comprobaron que las empresas latinoamericanas están organizadas en grupos comerciales, y continúan siendo propiedad de y administradas por grupos familiares. Investigamos las fuerzas y debilidades de la versión latinoamericana de las organizaciones comerciales, y también analizamos cómo se financiaban estos grupos, los esfuerzos que realizaban para igualarse a o competir con las multinacionales de los países industrializados (MNCs), y qué posibilidad tenían de ser exitosas dentro del contexto de la economía global. Confiando en los recientes progresos alcanzados por la teoría institucional y de las agencias, desarrollamos varias hipótesis investigatorias, y sugerencias para futuros estudios. RESUMO. Grandes empresas desempenham um papel essencial na competitividade nacional e no desenvolvimento econômico. Com o objetivo de estabelecer uma agenda de pesquisa que ao mesmo tempo seja alicerçada em bases teóricas relevantes e trate de importantes desafios enfrentados pela região, nós examinamos, neste artigo, a estrutura organizacional e a operação de grandes empresas privadas na América Latina. Como tem sido o caso desde pelo menos o fim do século 19, estudos têm revelado que empresas latino-americanas se estruturam em grupos de negócios e continuam pertencendo e sendo dirigidas por famílias. Nós nos concentramos em pesquisar os pontos fortes e fracos da versão latino-americana de organizações de negócios, incluindo como os grupos são financiados, seus esforços em estabelecer parcerias e/ou competir com multinacionais de países industrializados (MNCs), e suas chances de sucesso em uma economia globalizada. Baseados nos recentes avanços da teoria organizacional, nós elaboramos, então, uma série de perguntas de pesquisa e sugestões para pesquisas futuras.

Cross-Cultural Accommodation and Biculturalists in the Core Borderlands: A View of the Expatriate Experience in Border vs. Interior Multinationals

Abstract In 1988, the noted international business scholar Steven Kobrin wrote a controversial article where he argued that U.S. multinational companies (MNCs) were reducing their use of U.S. nationals in their foreign subsidiaries because of widespread performance problems. According to Kobrin (1988), U.S. expatriates are often unsuccessful due to a critical lack of cross cultural and second language skills. In a series of studies relying on interviews at 57 MNCs in Mexico, similar to Kobrin (1988), we found that there existed a clear trend towards expatriate reduction in U.S. subsidiaries located in the Mexican interior; that the cross cultural and second language skills of U.S. expatriates were generally low; and that significant conflict between U.S. and Mexican nationals was present because of these skill deficiencies. Utilizing a sample of 45 maquiladoras located in Reynosa, Tamaulipas, in this study we test to determine if these dynamics generalize to the border. Surprisingly, we found just the opposite, i.e. expatriate numbers while relatively low were stable or going down only slightly, there was a high incidence of internationally experienced, bilingual U.S. nationals in border plants; and there appeared to be little open conflict between U.S. and Mexican nationals. To account for these differences, we argue that the border context has contributed to a virtuous cycle of human capital development that is largely absent in interior locations.

High-Growth Entrepreneurship in Mexico

ABSTRACT Research from the United States finds a small percentage of firms are responsible for the great majority of net new job creation. We now have a fairly precise set of stylized facts regarding the characteristics of these high-growth firms (HGFs). However, we have little understanding of HGFs in Latin America. To address this gap, we explore the characteristics of HGFs in Mexico selected by Endeavor, a global business accelerator. We find Mexican HGFs are present in a wide range of industries, including information technology and consumer segments. Several are pursuing strategies targeting base of the pyramid consumers and/or expanding internationally. We conclude with suggestions for future research and policy implications.

Latin American Universities and Technology Commercialization

ABSTRACT A small but significant percentage of the discoveries made by university researchers have commercial value, especially in fields such as the biomedical sciences, material science, and information technology. Early stage technologies emerging from university labs represent an important source of innovation for technology firms in the United States (US), especially those located in close proximity to elite universities in regions characterized by high levels of entrepreneurial dynamism. Based in part on the U.S. demonstration effect, policymakers in the developing world increasingly view universities as institutions capable of accelerating technology-based economic development. In this article we examine the efforts of elite universities in Chile, Mexico, and Brazil to transfer faculty inventions to the marketplace. On average these institutions have upgraded commercialization infrastructure since the mid-2000s and a select few are beginning to generate significant licensing revenue and viable spinoffs. We conclude with policy recommendations and suggestions for future research.

The Quality of Maquiladora Investment in a Post China/WTO World: A Literature Review and Case Studies from Reynosa

ABSTRACT Studies have consistently shown that exports manufactured in China have taken a significant market share away from Mexican producers in the United States (US) import market. In this paper, we examine how this change is shaping the quality of foreign direct investment (FDI) in Mexicos maquiladora industry. Various thought leaders have suggested that low wage Chinese competition will force maquilas of out labor intensive sectors and will make them lean towards higher value added, technology intensive activities. An alternative perspective has been provided by those who argue that Mexicos unique comparative advantage is its geographic proximity to the US, and that there is no reason to believe proximity dependent maquilas will fit into a high-tech, high value added model. To determine which of these scenarios is more accurate, we summarize relevant literature and provide case studies drawn from five startup plants located in the only major Mexican city that has seen maquila employment gains over the 2000-2006 period. Research suggests that maquilas are leaning towards proximity dependent, and not necessarily technology intensive business models. The case studies illustrate a number of long term characteristics of the maquiladora environment that may limit upgrading. We conclude with policy recommendations as well as suggestions for future research. RESUMEN. Los estudios realizados mostraron consistentemente que las exportaciones de manufacturados provenientes de China han ganado una porción significativa del mercado de importación en los Estados Unidos, que solía estar en las manos de los productores mexicanos. En este estudio examinamos cómo este cambio está modelando la calidad de la inversión extranjera directa (FDI) en la industria maquiladora mexicana. Varios líderes de la industria han expresado que la competencia resultante de los bajos salarios chinos forzará a las maquiladoras a salir de los sectores con intensiva mano de obra, para desplazarse hacia otros de mayor valor agregado, y otras actividades vinculadas profundamente a la tecnología. Una perspectiva alternativa ha sido suministrada por aquellos que sostienen que la singular ventaja competitiva mexicana reside en su proximidad geográfica a los EE.UU., y no existe razón alguna para pensar que las maquilas que dependen de esta proximidad se encajarán correctamente en este modelo altamente tecnológico, de alto valor agregado. Con el propósito de determinar cual de estos escenarios es el más correcto, hemos resumido la literatura importante y suministrado estudios de caso extraídos de cinco plantas puestas en marcha, situadas en una de las más importantes ciudades mexicanas, cuyos índices de empleo provenientes de maquiladoras han aumentado durante el período 2000-2006. Las investigaciones sugieren que las maquilas están evolucionando hacia modelos comerciales que dependen de la proximidad geográfica, y no necesariamente intensivos en tecnología. Los estudios de caso ilustran un número de características del entorno de las maquiladoras a largo plazo, que pueden limitar su actualización. Hemos concluido emitiendo una política de recomendaciones, así como sugerencias para futuras investigaciones. RESUMO. Estudos mostram, consistentemente, que as exportações manufaturadas da China abocanharam uma fatia significativa do mercado dos produtores mexicanos no mercado de importação americano. Neste trabalho, examinamos como tal mudança está determinando a qualidade do investimento direto estrangeiro (FDI) na indústria maquiladora do México. Diversos líderes pensadores afirmaram que a competição chinesa, através de baixos salários, forçará as maquilas a deixar setores de mão-de-obra intensa e crescer em busca de um maior valor adicional, as atividades de alta tecnologia. A partir de uma perspectiva alternativa, outros defendem que a única vantagem comparativa mexicana é a proximidade com os Estados Unidos, e não há razão para acreditar que as maquilas dependentes desta proximidade adaptar-se-ão ao modelo de maior valor adicional e de alta tecnologia. Para comprovar a precisão destes cenários, resumimos o que há de relevante na literatura e apresentamos estudos de casos baseados em cinco fábricas inauguradas, na única grande cidade mexicana, que presenciou o aumento de emprego das maquilas no período de 2000 a 2006. Pesquisas sugerem que as maquilas estão tornando-se dependentes da proximidade e, não necessariamente, da alta tecnologia e dos modelos de negócios. Os estudos de caso registram uma série de características arraigadas do ambiente da maquiladora, que pode limitar o seu crescimento. Concluímos com recomendações políticas e com sugestões para pesquisas futuras.