Abstract
This research asks who captures the greatest value in the global electronics industry by testing the concept of the "smiling curve", which predicts that the greatest value is captured by upstream and downstream firms, and the lowest value is captured in the middle of the value chain. We test the concept using the Electronic Business 300 data-set for 2000-2005. We find that lead firms and component suppliers earn higher gross margins and net margins compared to contract manufacturers. However, the differences are minimal for return on assets (ROA) and return on equity (ROE). We also find that active component suppliers gain higher profits than passive component suppliers. These findings suggest that the smiling curve is right if value is defined in terms of gross margins, but the cost of sustaining a position on either end of the curve is so high that returns on investment are similar across the curve.
Original language | English (US) |
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Pages (from-to) | 89-107 |
Number of pages | 19 |
Journal | Industry and Innovation |
Volume | 19 |
Issue number | 2 |
DOIs | |
State | Published - Feb 2012 |
Keywords
- Electronics industry
- component supplier
- lead firm
- smiling curve
- value chain
ASJC Scopus subject areas
- General Business, Management and Accounting
- Management of Technology and Innovation