GOVERNING AUTOMOTIVE SUPPLIER PARKS: LEVERAGING THE BENEFITS OF OUTSOURCING AND CO-LOCATION? *

Abstract

Outsourcing of modules and systems has become a key feature of the global automobile industry in recent years. At the same time, suppliers are co-locating inside, or adjacent to, the automakers’ assembly plants, in order to assemble large chunks of the car. This paper draws on evidence from Europe and Brazil to analyze the causes and consequences of outsourcing and co-location for the governance of the firm, industry dynamics, and employment. The paper finds that modular product architecture is indeed associated with more outsourcing, but the outsourcing of production tasks is not necessarily associated with the disintegration of asset ownership. If anything, outsourcing goes hand-in-hand with integrated asset ownership in modular consortia. Moreover, the paper presents evidence that relational contracts may coexist with integrated and non-integrated asset ownership patterns. This diversity in configuring supplier parks is explained as much by social norms and local institutions (e.g. in the labour market) as by management policy. Comments welcome. * The author thanks the MIT International Motor Vehicle Program (IMVP) for a decade of funding from 1994 to 2004, and its community of researchers for valuable discussion and practical assistance. I am particularly grateful to Uli Jurgens and Mahrukh Doctor, who acted as coach/ co-researcher/ interpreter on our visits to the German and Brazilian supplier parks.

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