Industry Co-Evolution and the Rise of a Shared Supply-base for Electronics Manufacturing

Abstract

This paper develops a co-evolutionary model at the industry level by highlighting the interplay between increased strategic outsourcing and the rise of shared supplier networks. To do so we explore a case where increased strategic outsourcing by groups of lead firms has, over time, led to the rise of a shared supplier network, one that can be accessed by the industry as a whole, even by lead firms that compete head-to-head in final product markets. The case is the outsourcing of electronics production and the concomitant rise of a pool highly competent contract manufacturers based in the United States and Taiwan. In this case inter-firm relations tend to be neither exploitative nor symbiotic in the classic sense, but flexible, modular, and self-reliant. Our approach postulates an industry-wide virtuous cycle between lead firm strategic outsourcing and the development of supplier competencies. Based on a scope-linkage framework, and a dynamic view of inter-organizational transactions, we seek to expose the key organizational logic that underpins the changing patterns of inter-firm collaboration we have observed in the electronics industry, and expand the co-evolutionary framework to the industry level.