chapter  1
10 Pages


Changes in communications networks can increase the quality and speed of coordination activities between two agents. For example, improved communications networks make communications with a central office or with customers more efficient. These improvements facilitate the cross-border fragmentation of production processes. To put it another way, as communication links improve, the incentives for specialization and outsourcing expand.1 In this context, services provided by communications networks are at the very core of the internationalization of economic activities, providing connections and allowing the coordination of geographically separated production processes.2 Several articles have been devoted to the study of various aspects of fragmentation. In their seminal contribution, Jones and Kierzkowski (1990) argued that fragmented technology requires service links, which are mainly provided by information and communications networks, to connect separated production

blocks. Deardorff (2001a) argued that liberalizing trade in services facilitates fragmentation, which, in turn, stimulates trade in goods. The link between services and fragmentation of production processes is further explored by Long, Riezman, and Soubeyran (2005).3