Fredrik Sjöholm: International fragmentation of production processes is a relatively recent phenomenon: It is only in the last decades that firms have really begun to place different parts of production in different countries. More firms in more industries are now taking part in this process. There are several explanations for the increased fragmentation. Improvements in communication technologies and falling trade costs are presumably two of the most important ones.
East Asia has been, and remains, a key region in international production networks. Early on, it was a location where foreign multinational enterprises (MNEs) in the electronic industry placed production of parts and components. Japan, in particular, has also been a source of such MNEs. The exact magnitude and relative importance of fragmentation in the region, however, remains unclear. Most previous evidence is of anecdotal character or rests on case studies. The authors are therefore making a substantial contribution to our...