Recreating and Extending Japanese Automobile Buyer - Supplier Links in North America

We compare buyer-supplier links established by pairs of Japanese-owned automobile assemblers and component manufacturers operating in Japan and in North America during 198%90. Eight assemblers and more than I70 Japanese component manufacturers had established North American manufacturing facilities. In total, Japanese automobile assembly organizations operating in North America had recreated about a quarter of their Japanese supply links. The suppliers that set up North American facilities had recreated almost 60 percent of their links with traditional buyers and formed more than 16 percent of the possible extension links with new assembler partners. We identifi several economic and organizational factors that influence whether an existing buyer-supplier link will be recreated in a new location and whether firms that do not have a buyer-supplier relutionship at home will form an extension link in the new location. We find that the presence of a long-term buyer-supplier relationship, buyer and supplier entry timing to the new location, the joint venture status of the buyer, supplier size, and the breadth of a supplier's sales base in the home market influence the likelihood that links will be recreated and extension links will be formed. Companies that set up business operations outside their domestic market often form supply links with home-country suppliers that also have Indeed, close links with home-country suppliers might provide an assembler some of the intangible firm-specific advantages that internalization theorists and international strategists argue are needed to support a firm's international expansion. It is unlikely, however, that any expanding firm will establish links in the new location with all possible home-country suppliers. We understand little about the firm-level factors that determine which links between home-country buyers and suppliers will be formed in the new location, because most research concerning buyer-supplier ties in international expansion either focuses on a few cases or studies the empirical issue as an aggregate industry-level phenomenon. In this study, we identify incentives that might lead assemblers that have expanded internationally to establish links in the foreign location with suppliers from the assemblers' home country. Empirically, we examine the buyer-supplier links of Japanese-owned automobile assemblers and first-tier component manufacturers operating in North America during 1989-90. We define a supplier as a company that produces components and an assembler as a company that combines components into an end-product. (In our context, the terms buyer and assembler are synonyms.) In the automobile industry, the assemblers are the motor vehicle manufacturers such as …