Three essays on supply chain networks and R&D investments

Abstract

This dissertation evaluates how supply chain networks play a central role in the Korean automobile industry. The study consists of three essays. The first essay analyses the dynamic patterns of the Korean automobile industry focusing on the network measures, the second essay tests the stability of network in the Korean automobile industry, and the third essay estimates the effects of network measures on automotive parts suppliers’ R&D investments. ❧ The first essay (Chapter 2) summarizes the Korean automobile industry and presents dynamic patterns. The dynamic patterns show that network structures should be considered to connect theory with empirical data. The dynamic patterns of the Korean automobile industry are not consistent with the insights from Sutton (1991). As market size increased, the number of automotive parts suppliers remained almost the same from 1999 to 2010. However, the automotive parts market did not seem to be R&D intensive. To explain the contradiction, I define networks by exclusiveness and the identity of partnerships (Hyundai-Kia and Non Hyundai-Kia) as network measures and divide the automotive parts suppliers into four sectors. When considering network measures, I find the consistent results with Sutton’s insights. ❧ The second essay (Chapter 3) shows the network measures and tests the stability of the supply chain in the Korean automobile industry. To test the stability, I use the eigenvalue approaches of the Laplacian matrix. The network structure implies the partnership between automobile assemblies and automotive parts suppliers and the network structures are available in 2008 and 2013. Since network structures could be defined by adjacency matrices, distance measures would be based on graph spectra. I define the degree matrices for two matrices. The Laplacian matrix is the difference between the degree matrix and the adjacency matrix and the eigenvalue is used to calculate the distance measure. The measure shows that the supply chain networks in the Korean automobile industry is very stable. ❧ The third essay (Chapter 4) estimates the network effects on suppliers’ R&D decisions using panel data techniques. Due to the stability of the supply chain, network measures are time-invariant and thus cannot be estimated by the fixed effects estimator. Instead, the Fixed Effects Filtered estimator (Pesaran and Zhou, 2013) is used which can estimate both time-variant and time-invariant regressors consistently. The results suggest that the identity of partners, exclusiveness and information flows between competitors are important factors in suppliers’ R&D strategy. In addition, I find that internal R&D and external R&D are substitutes when supplier has an exclusive contract.