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Re-evaluating the ‘smile curve’ in relation to outsourcing industrialization

Shen, Jim Huangnan, Deng, Kent and Tang, Sarah (2019) Re-evaluating the ‘smile curve’ in relation to outsourcing industrialization. Emerging Markets Finance and Trade. ISSN 1540-496X

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Identification Number: 10.1080/1540496X.2019.1694505

Abstract

In this paper, we argue that the widely used concept of the value-added driven ‘smile curve’ in the international business literature, which often illustrates a zero-sum game between interdependent nations in the global supply chain, requires revisiting. In particular, the U-shaped smile curve for the distribution of profitability among partners can be inverted if firms from the developing economies manage to obtain high productivity from their workers and have no high entry costs to the midstream industries that specialize in global supply chains. We construct an economic model and find that the theories proposed in the paper are broadly consistent with the empirical evidence. Our findings have some important implications for the current debate on industrialization strategies with particular reference to outsourcing industrialization for developing countries.

Item Type: Article
Official URL: https://www.tandfonline.com/toc/mree20/current
Additional Information: © 2019 Taylor & Francis Group, LLC
Divisions: Economic History
Subjects: H Social Sciences > HD Industries. Land use. Labor > HD2329 Industrialization
H Social Sciences > HF Commerce
H Social Sciences > HC Economic History and Conditions
Date Deposited: 06 Jan 2020 10:36
Last Modified: 29 May 2020 23:12
URI: http://eprints.lse.ac.uk/id/eprint/102992

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