Spillovers, spin-offs and the creation of local suppliers in the Mexican automotive industry

Abstract:

Despite some general agreement on the increased relevance of FDI in national economies, the effects of spillovers are severely disputed, the measurement of such effects is problematic and the micro mechanisms through which they are produced are neither well identified nor explained.
For the last 30 years Mexico assumed an increasingly relevant role in the manufacturing of automobiles for the North American region. In theory, this should result in specific spillover effects that might increase the opportunities for local suppliers. However, most of the research done on the Mexican auto industry emphasizes the limits of this industry in generating local linkages. This specific topic is relevant for the debate on the spillover effects from MNCs over the hosting countries and regions, given the lack of evidence and the theoretical “black box” on the mechanisms operating at the micro level.

This paper is based in a study conducted from 2011 to 2013, designed to gather evidence on new local knowledge-intensive firms within the supplier networks of the automotive industry in Mexico. A total of 100 visits to SME’s plants and owners interviews were conducted, focusing on the origins of the firm, the dynamics of the information flows and knowledge transmission, and the upgrading patterns through the value chain. The analysis is based in the comparison between suppliers versus non suppliers of the auto industry.

The main contribution of this paper consists in the development of a typology of the mechanisms that enable these firms to emerge and evolve, and the identification of two differentiated trajectories based in: a) spin offs and learning by interaction with MNCs, ad b) the institutions and agents of regional innovation systems