Stephen Hymer and the externalization of production

Abstract

Stephen Hymer has rightly been credited with predating much of the literature on internalization and the theory of the multinational corporation (MNC) that has emerged over the past thirty years. But relatively little attention has been given to his insights on the externalization of production by corporations—a phenomenon also commonly referred to as subcontracting. Hymer clearly envisaged the circumstances under which MNCs might choose to subcontract production to independent enterprises. Such subcontracting has, of course, become a significant phenomenon in the global economy since the 1980s yet, in contrast to most of the extant literature on the topic, Hymer clearly sees it as means by which MNCs might extend, rather than relinquish, control over production. Our objectives in this paper are threefold. First and foremost, we want to highlight Stephen Hymer's prescient insights regarding the externalization of production by MNCs. Second, we want to demonstrate how Hymer predated the literature on Global commodity chain (GCC) analysis. A key feature of GCC analysis is the explicit recognition that firms may exploit their ownership advantages without having to internalize productive activities, and yet may retain control over the essential aspects of the production process. And last but not least, we want to illustrate the applicability of these insights using the example of the global garment industry.