The fragmentation of production and the competitiveness of nations in the automotive sector–A network approach

In recent decades the organisation of production has changed, with production and manufacturing activities no longer taking place in a single location, with lower transportation and communication costs leading to production activities geographically spread out into a global value chain. This reorganisation and fragmentation of the production process has led to increased sources of competition at the international level, with many firms from industrialised nations increasing their level of outsourcing and off-shoring of lower value activities to developing countries. Along with the increase in outsourcing activities, many industrialised nations are also now facing increasing competition from developing countries, who are steadily developing capabilities, in which industrialised nations once held a firm competitive advantage. This paper makes use of network analysis of the international trade network to analyse the competitive level of countries in the automotive industry, and to answer the research question of to what extent is the competitiveness level of a country determined by its position within the international trade network. The application of the temporal network autocorrelation model (TNAM) will be used to answer this question, this is an advanced statistical method that provides a highly flexible framework to model the competitiveness of nations embedded in an international trade network.