Small and medium enterprises as pioneers in the expansion of global production networks: A case study of the Japanese electronics industry in Guangdong, China

Abstract

Japan has been the largest source country of foreign direct investment (FDI) in China, excluding overseas Chinese territories and tax havens. However, Japan's large-scale but relatively closed production networks have received little discussion in previous research. Two peaks in Japanese investment can be distinguished: the first led by the electronics industry in the mid-1990s and the second by the automotive industry after 2003. Cross-border production network building in the electronics industry is quite different from the scenarios of conventional global production networks (GPN) theory, where leading firms dominate the building of global production networks. In this paper, I demonstrate that in the development of the electronics industry, the institutional advantage small and medium enterprises have of knowing how to operate production bases in Southern China has enabled them to guide leading firms in building cross-border production networks.