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The moving frontier: the changing geography of production in labour intensive industries

Final Report Summary - MOVE (The moving frontier: the changing geography of production in labour intensive industries)

The work was divided into two parts. The first part is concerned with the more theoretical aspects and consists of four work packages (WPs).

WP1 analyses two questions: why and how do labour intensive firms delocalise. The conceptual framework proposed for analysing the delocalisation of labour intensive firms has four main analytical dimensions that are intersected by wider categories i.e. the firm with its own unique set of resources and competitive advantages; the sector with its given technologies and markets; the environment (local / regional / national) with its unique institutions, civil society, history and policies; and the global environment with its unique institutions, governance and power relations.

WP2 enhanced understanding of the enterprise strategies in labour intensive sectors. The emerging picture is one of considerable diversity in the enterprise strategies. Enterprises may opt for different strategies when not only when they operate in different segment of the market and in different national context; or in the same segment of the market but in different national context, but even when they operate in the same segment of the market and in the same national context.

WP3 argues that public debate on the social consequences of delocalisation of labour-intensive industries is clouded by common misinterpretations. The analysis conducted in five countries shows that these effects are mainly observed on a local scale and to a lesser extent on the regional level. Widespread emphasis on job losses ignores the fact that this decline usually has no direct impact on unemployment levels. The balance of negative versus positive effects is place-dependent and determined by the role of the sector / employer on the labour market and the overall performance of the regional / local economy.

The main problem is not delocalisation itself, but the weaknesses of certain regions and localities. The net employment effects of delocalisation within the European Union are rather positive. Delocalisation facilitates lower unemployment in the new member states to a greater extent than it contributes to higher joblessness in the developed areas, where more alternative employment opportunities exist. A substantial part of manufacturing jobs and related improvements in skills and capabilities go to peripheral regions of Central and Eastern Europe and to underprivileged social groups. There is also little evidence for the 'race to the bottom' in terms of wages and employment conditions. This may primarily be interpreted as an effect of the stable, regulated environment of the European Union.

WP4 argues that the notion of governance has come into prominence in the context of global economic, social and political restructuring where one of the key changes is that coordination is not anymore the exclusive domain of states. Indeed broad social processes are becoming increasingly embedded into much more complex institutional arrangements that are organised around diverse spatial scales (sub-national, national, supra-national) and different networks. These changes raise both substantive and theoretical questions some of which are central to understanding the process of delocalisation of labour intensive industries.

WP5 examines the impact of processes of global integration upon inter-organisational relationships and enterprise strategy in the clothing industry, drawing on the results of extensive fieldwork in the five European countries. The findings suggest that international opportunities can be best exploited initially by early engagement, with low commitment strategies, followed later by significant foreign investment and joint venture creation, and finally by an emphasis on buyer / supplier relationships.

WP6 described major patterns of delocalisation of European and world electronics industries. This is a hot topic since every week in Central and Eastern Europe two new factories are established and 500 new jobs are created while at the same time 1-2 factories in Western Europe are closed. The chapter investigates supply chains of electronics industry and geographical patterns of electronics industry in Europe. Major forms of delocalisation in electronics industry are foreign trade, subcontracting and acquisition / mergers of firms. Electronics industry location and establishment of new factories is influenced both by public sector policies and private sector demand.

The main research objectives of WP7 were the identification of industry-specific and country-specific factors and effects of delocalisation. The focus is placed on the question of how the national production networks are integrated in the European ones, on outlining the causes and the effects of this process, and what opportunities and constraints does the existing relationships create in terms of international competitiveness of footwear firms.

WP8 analysed the internationalisation of the European software industry in the context of subcontracting and FDI. Forms of delocalisation and their extent in the European software industry, the reasons behind delocalisation from both perspectives of host and home countries were examined. Prospects of further delocalisation to locations outside Europe were investigated.