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INDUSTRIAL GROUPS AND DIVISION OF LABOR IN CHINA'S AUTOMOBILE INDUSTRY
Author(s) -
MARUKAWA Tomoo
Publication year - 1995
Publication title -
the developing economies
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.305
H-Index - 30
eISSN - 1746-1049
pISSN - 0012-1533
DOI - 10.1111/j.1746-1049.1995.tb00719.x
Subject(s) - china , citation , automotive industry , division of labour , advertising , library science , political science , marketing , business , computer science , engineering , law , aerospace engineering
Until the 1970s, China’s industries had followed a system which can be called a vertically divided division of labor. Under this system each enterprise within an industry generally specialized in producing a particular end product within a specific narrow field, and each enterprise subsumed within itself all of the stages in the production process. In the machinery industry, for example, a firm manufacturing a particular machine would carry out the final assembly process as well as the upstream machining, casting, forging, and heat-treating processes. Figure 1 illustrates the concept of the vertically divided division of labor as was found in the automobile manufacturing industry. An enterprise subsumed within itself all of those upstream-production stages encompassed by the solid line, but very often the firm produced only one particular end product. This division-of-labor system derives partly from the preconditions in China at the time the country began industrialization. The country’s preexisting industrial base was extremely weak, and there was little hope of procuring parts and components externally. In addition, the vertically divided division of labor reduced the uncertainties inherent in transactions among enterprises because only a small number of enterprises became involved in the production process from the raw-materials stage to the final-assembly stage. As a result the system was seen as more suitable for a planned economy. In the former Soviet Union the vertically divided division of labor had also predominated among industries, and it was this form that the Chinese took as their model for industrialization. In the vertically divided division-of-labor system, the scale of production for parts, castings, and other upstream processes is often too small to achieve economies of scale, or there may be imbalances in production capacity among the different stages of the production process, and segments of a firm’s production capacity are left idle. Moreover, under this system firms are susceptible to changes in demand because they are unable to offset a decline in demand for a specific product by shifting production to another product; and when demand to the end product The Developing Economies, XXXIII-3 (September 1995)