The auto OEMs impacts on local development: The case of knowledge-intensive services in Mexico

Abstract:

This paper seeks to know the relationship between services in auto industry, in order to understand and size the value that auto industry contributes to local development through the Mexican local services it hires for its manufacturing and / or functional operations.
To do this, we try to determine and understand the use of services based on knowledge intensive use that are within the car manufacturing processes. The new economy, the digital-manufacture and industry 4.0 are terms that are becoming more generalized and refer to a priority role of knowledge-intensive services within manufacturing.
In the studies on the impact of manufacturing car & components producers MNEs in Mexico, the predominant issue has been the direct effects on employment; quality of labor and trade balance, and less importance has been given to MNEs' contribution to the development of production of goods and services through local supplier companies. Narula and Dunning point out the importance of indirect ways in which foreign firms impact local productive capacity: "where inward MNE activity results in positive externalities, and when domestic firms have the capacity to internalize these externalities usefully, and if the non- Sector supports domestic capacity building, there will be industrial development ". (Narula, Dunning, 2010: 266).
The general process in which the local impact of the large manufacturing enterprise is inscribed is the outsourcing or servicing (OECD, 2000) of the economy understood as the integration of activities of production of goods and services within the firm.
Therefore, to analyze the conditions of the development of regions, it is necessary to understand the articulations between the sectors of manufacturing, and those of services, (Daniels, Bryson, 2002, Pilat, Wolfl, 2005). An increasingly diversified economy, which includes the production of services with educational requirements for the labor force and a growing percentage of producer services, is associated with higher productivity and income at the regional level (Greenfield, 1996).
Our research is based on a recent survey that attempts to reconstruct an early part of the value chain linking car producers firms in Mexico with their local service providers that are key to the strategy of the former. The methodology is based on interviews with two OEMs (VW-Puebla, Ford-Hermosillo) located in Mexico and a survey to 20 Mexican suppliers and knowledge intensive services. We offer the data and conclusions of a pilot study with tractors that have opened the possibility of contacting their service providers. Our first findings show that there is a sector of local advanced service enterprises that has been market driven and represents OEMs, whose study is needed to assess the impact of the OEMs auto industry at the regional level.