Joining Pre-existing International Production Networks: Implications for India's Economic Integration with East Asia

Abstract

This study provides a conceptual framework to explain the difficulties a late-follower country will need to surmount if it seeks to join pre-existing international production networks (IPNs). To address this problem, we consider the cost minimization problem that confronts multinational firms as they choose how to locate fragmented production processes across borders. By clarifying IPN-related costs, we describe the structural disadvantages that confront late-follower countries and provide several policy implications that may help these countries overcome their disadvantages through targeted efforts. We use our framework to guide our examination of economic data, to analyze the hurdles that limit India's participation in the East Asian IPNs.