Value capture in global production networks: Evidence from the Taiwanese electronics industry

Namchul Shin, Kenneth L. Kraemer, Jason Dedrick

Research output: Contribution to journalArticlepeer-review

5 Scopus citations


In today's global electronics industry, lead firms and suppliers of key components capture greater value than contract manufacturers. Using data from the Taiwanese Stock Exchange from 2002 to 2009, this research aims to examine if the pattern of value capture in the global electronics industry holds for Taiwan. We also test the impacts of research and development (R&D) spending on firm profitability and returns. Our results show that lead firms and component suppliers capture higher gross profits from their R&D spending, compared to contract manufacturers. However, contract manufacturers have higher return on equity. Component suppliers' return to R&D as measured by return on equity is lower than contract manufacturers. These findings suggest that component suppliers capture higher profits as lead firms do, but the cost of R&D for component suppliers is so high that their returns on investment are not as great as contract manufacturers. This also suggests that Taiwanese component suppliers are unable to create entry barriers or gain pricing power from their R&D investments.

Original languageEnglish (US)
Pages (from-to)74-88
Number of pages15
JournalJournal of the Asia Pacific Economy
Issue number1
StatePublished - Jan 2014


  • Taiwan
  • electronics industry
  • global production networks
  • value capture

ASJC Scopus subject areas

  • Geography, Planning and Development
  • Development
  • Political Science and International Relations


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