ABSTRACT
International fragmentation of production (involving the splitting of the production process into discrete activities which are then allocated across countries) has been an increasingly important facet of economic globalisation over the past three decades. With a modest start in electronics and clothing industries in the late 1960s, multinational production networks have gradually evolved and spread into many industries such as sport footwear, automobiles, televisions and radio receivers, sewing machines, office equipment, power and machine tools, cameras and watches, and printing and publishing. At the formative stage, the process involved locating small fragments of the production process in a low-cost country and reimporting the assembled components to be incorporated in the final product. Subsequently, production networks began to encompass many countries engaged in the assembly process at different stages, resulting in multiple border crossings by product fragments before they are incorporated in the final product. Recently two other important developments in the process have set the stage for rapid expansion in the share of fragmentation-based trade in world trade. First, some fragments of the production process in certain industries have become ‘standard fragments’ which can be effectively used in a number of products.1 Second, as international networks of parts and comments supply have become firmly established, producers in advanced countries have begun to move the final assembly of an increasing range of consumer durables (for example, computers, cameras, TV sets and motor cars) to overseas locations in order to be physically closer to their final users and/or take advantage of cheap labour.
