An Empirical Assessment of Technology Transfer Emerging from Integration into Buyer-Driven Commodity Chains in the Global Apparel Industry By Jonathan A. Fink & Shahdad Naghshpour University of Southern Mississippi
Discuss Emerging Academic Debate: Does integration into value/commodity chains in apparel industry lead to process of industrial upgrading?
Present empirical test on impact of value chain integration and the shift from maquiladora assembly to a more advanced form of integrated manufacturing, on industrial upgrading in the cotton denim apparel industry of Torreon, Coahuila, Mexico.
Allows for deeper understanding of implications of outsourcing production on economic development in LDC’s.
Provides policymakers at both national and local levels with roadmap for design of trade, investment and industrial policies that contribute to growth in wages, employment, income and sustainable development.
Literature Review: Origins and Development of Commodity Chain Theory
Hopkins and Wallerstein (1978). Developed theory that production based on integrated network of transnational processing nodes.
Wallerstein’s World Systems Theory = chain domination by core country firms with no positive developmental benefits for LDC’s arising out of chain integration.
Gereffi (1994, 1999) Defines commodity chains as either producer or buyer-driven. Gereffi’s research focus = buyer driven chains in the apparel industry.
Developed by Gereffi (Early 1990’s). Major case study of upgrading in Torreon, Coahuila-Mexico denim apparel industry performed by Bair and Gereffi (2003)
Theory advanced in qualitative case studies of apparel and other labor intensive industries by: Korzeniewicz (1992); van Grunsven and Smakman (2002); Humphrey and Schmitz (2000); Schmitz & Knorringa (2000) & other scholars at Institute of Development Studies (IDS), Univ. of Sussex, Brighton, England.
Develop exploratory model to measure impact of movement within the value chain in an upward trajectory from assembly to OEM/full package production ) on per unit value added the denim apparel cluster of Torreon, Coahuila, Mexico.
Does the transfer of knowledge from foreign buyers to LDC manufacturers lead to upgrading and increases in value added at the firm level?
H 0 : There is no tangible relation between the denim apparel commodity chain and industrial upgrading in apparel manufacturing as firms move from assembly processing to OEM.
H a : Integration into the denim apparel commodity chain by apparel manufacturers has led to a statistically significant increase in industrial upgrading (as measured by per unit value added) as firms move in the upward trajectory from assembly to OEM.
Labor Productivity statistics only available in 5 year intervals based on Censos Economicos. Due to weak data storage by INEGI, time series analysis in excess of 15 years not feasible. Almost all trade and census data prior to 1989 no longer archived.
Inconsistent data reporting by INEGI:
1) Trade data prior to 1993 not segmented by maquila/non-maquila.
2) Reporting of fabric import data, prior to 1996 is in kilograms
instead of M2. Leads to less precise calculation of raw material
requirements per apparel piece.
How Can there be Upgrading Amidst Price Stagnation? Source: U.S. Department of Commerce Office of Textiles and Apparel (OTEXA) Database. Per unit prices converted to Mexican Pesos based on the ILO Laborsta CPI-Mexico Database. (see appendix four)
Are Labor Productivity Gains in Coahuila Correlated to Learning from Foreign Buyers? Are other variables the causal agents for productivity gains ? Source: INEGI. La Industria Textil y Del Vestido en Mexico: Serie de Estadisticas Sectorales. Editiones 1998 and 2005
Findings of our model indicate no correlation between industrial integration and transformation from assembly to OEM and increases in value added in denim apparel manufacture.
Data analysis indicates movement from assembly (maquiladora) to OEM has not led to significant gains in inflation adjusted per unit export prices for the denim apparel industry of Torreon, Coahuila, Mexico, however:
Gains in value added highly correlated to a) general pattern of declining fabric prices and b) gains in labor productivity. However, our model indicates that productivity gains in the Torreon industry are not associated with technical transfer of knowledge from foreign buyers.