Upgrading through Integration? The Case of the Central Eastern European Automotive Industry 1

Abstract

Introduction While it is a fact that (formerly) peripheral countries are increasingly participating in the manufacturing process of commodities, it is an open and on-going research question if they are able to upgrade and develop as a result of this integration. This paper2 aims to address this research question. In so doing, it will narrow down the focus on the international division of labor in terms of both sector and region. It will look at the automotive sector as this industry is characterized by combining both the production of very high value-added components which are capitalintensive and require research and development (R&D) activities on the one hand, and manufacturing of low value-added components which are very labor-intensive on the other. Furthermore, the automotive sector has strong links to related industries such as engineering and the chemical industry. In terms of region this paper will concentrate on the international division of labor in the European Union (EU), in particular the new member states in Central Eastern Europe. The EU is not only one of the largest markets for the automotive sector but also hosts many of the most important and largest companies in the industry. Most importantly, the relatively recent Eastern enlargement of the EU provides an interesting field of inquiry as peripheral countries are being integrated in both ways, economically and politically. How does the pattern of international division of labor in the European automotive sector look like? Did the new member states and its actors benefit? Did integration in the value chain allow for upgrading and development on their side? How is EU-integration linked to upgrading prospects? These are the key research questions this paper will try to answer.