Download or read book Technology and Production Fragmentation written by Teresa C. Fort and published by . This book was released on 2016 with total page 54 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper provides direct empirical evidence on the relationship between technology and firms' global sourcing strategies. Using new data on U.S. firms' decisions to contract for manufacturing services from domestic or foreign suppliers, I show that changes in firm use of communication technology between 2002 to 2007 can explain almost one quarter of the increase in fragmentation over the period. The effect of firm technology also differs significantly across industries; in 2007, it is 20 percent higher, relative to the mean, in industries with production specifications that are easier to codify in an electronic format. These patterns suggest that technology lowers coordination costs, though its effect is disproportionately higher for domestic rather than foreign sourcing. The larger impact on domestic fragmentation highlights its importance as an alternative to offshoring, and can be explained by complementarities between technology and worker skill. High technology firms and industries are more likely to source from high human capital countries, and the differential impact of technology across industries is strongly increasing in country human capital.