ABSTRACT
Globalization is a process of economic integration that involves international trade, international capital flows, the international diffusion of technologies and the organization of production networks on an international scale. The development of “international production sharing activities” (Yeats, 1998) has been an evolving process. Historically, the earliest forms of this process involved the production of primary commodities in developing countries, processing in industrial countries and (partly) reexportation of the final good. Escalation in import tariff systems of industrial countries and high transaction costs have contributed to this exchange pattern. In the second half of the twentieth century, a different form of production sharing emerged. This involved the relocation of some (mostly labor-intensive) stages of the production process to lowincome countries within multinational enterprises or enterprise networks. For example, electronic components produced in industrial countries were assembled in Southeast Asia for international firms, and wearing apparel was assembled virtually all over the world from textiles produced in third countries.
