Learning and Innovation Under Changing Market Conditions: The Auto Parts Industry in Mexico by Bertha VALLEJO CARLOS ISBN 978 90 5278 981 1 © copyright Bertha VALLEJO CARLOS, Maastricht 2010 Printing: Datawyse / Universitaire Pers Maastricht Learning and Innovation Under Changing Market Conditions: The Auto Parts Industry in Mexico DISSERTATION to obtain the degree of Doctor at Maastricht University, on the authority of the Rector Magnificus Prof. Dr. G.P.M.F. Mols, in accordance with the decision of the Board of Deans, to be defended in public on Wednesday 22 September 2010, at 14.00 hours by Bertha VALLEJO CARLOS Supervisors Prof. Dr. P. Mohnen Co-supervisor Prof. Dr. L. K. Mytelka (Carleton University, Canada) Adviser Prof. Dr. B. Oyelaran Oyeyinka (UN-HABITAT) Assessment Committee Prof. Dr. R. Cowan (chair) Prof. Dr. H. A. Romijn (Technische Universiteit Eindhoven) Prof. Dr. W.E. Steinmueller (University of Sussex, United Kingdom) Prof. Dr. A. Szirmai 4 Contents Table of Contents (in detail) 7 Table of Figures and Tables 11 Summary 13 Samenvatting 15 Acknowledgements 17 Chapter 1 Introduction 19 Chapter 2 Analytical Framework 33 Chapter 3 The Mexican Economy, Automotive Policies and the Emergence of 77 the Automobile Industry Chapter 4 The Mexican Auto Parts Industry and Global Automobile 107 Production Tendencies Chapter 5 The Adoption of Learning Mechanisms Under Changing Market 133 Conditions Chapter 6 Exporting Mexican Auto Parts Firms 151 Chapter 7 Integration in the Mexican Auto Parts Sector 165 Chapter 8 Conclusions and Discussion of Findings 177 References 197 Curriculum Vitae 209 Table of Contents (in detail) TABLE OF FIGURES AND TABLES................................................................................. 11 SUMMARY ................................................................................................................ 13 SAMENVATTING ......................................................................................................... 15 ACKNOWLEDGEMENTS .............................................................................................. 17 CHAPTER 1 INTRODUCTION........................................................................................ 19 1.1 RATIONALE OF THE STUDY ....................................................................................... 21 1.2 THE RESEARCH OBJECTIVE AND APPROACH ................................................................ 26 1.3 THE DATA ............................................................................................................ 27 1.4 RESEARCH CONTRIBUTION ...................................................................................... 29 1.5 THESIS OUTLINE .................................................................................................... 29 CHAPTER 2 ANALYTICAL FRAMEWORK ...................................................................... 33 2.1 INTRODUCTION ..................................................................................................... 35 2.2 SYSTEMS PERSPECTIVE ........................................................................................... 35 A. Institutions and Organizations..................................................................... 37 B. Interaction.................................................................................................... 40 C. Examples of SI Classifications....................................................................... 42 D. Elements from SI Used in This Research...................................................... 43 2.3 INTERACTIVE LEARNING AND CAPABILITY BUILDING THEORIES ........................................ 45 A. Organizational Learning ............................................................................... 45 B. Technological Capabilities............................................................................ 46 B.1. Building and Strengthening Technological Capabilities .................................................... 48 B.2. Technological Capability at the Technological Frontier .................................................... 49 B.3. Technological Capability in Latecomer Firms.................................................................... 50 C. Technological Efforts and Learning Mechanisms......................................... 52 C.1 Technological Efforts Within the Firm ............................................................................... 53 D. Innovation Capabilities ................................................................................ 56 2.4 LEARNING BY EXPORTING ........................................................................................ 57 2.5 APPROACH OF THIS THESIS ...................................................................................... 59 Methodology.................................................................................................... 64 2.6 APPENDIX – CHAPTER 2.......................................................................................... 74 CHAPTER 3 THE MEXICAN ECONOMY, AUTOMOTIVE POLICIES AND THE EMERGENCE OF THE AUTOMOBILE INDUSTRY....................................... 77 3.1 INTRODUCTION ..................................................................................................... 79 3.2 HISTORICAL STRUCTURAL CONTEXT ........................................................................... 79 A. Import Substitution Industrialization Period ............................................... 79 7 3.3 HISTORICAL DEVELOPMENT OF THE MEXICAN AUTO INDUSTRY ...................................... 82 A. The Institutionalization of the Industry – The 1962 Automotive Decree......................................................................................................... 84 A.1. Technological Capacity and Innovation Responses – Origins of the Industry................... 87 B. Shift to an Export-Led Strategy – The 1972 Automotive Decree ................. 91 C. The Further Denationalization of the Industry – The 1977 Automotive Decree......................................................................................................... 95 D. The New Economic Model........................................................................... 97 3.4 SUMMARY ......................................................................................................... 103 3.5 APPENDIX – CHAPTER 3........................................................................................ 105 CHAPTER 4 THE MEXICAN AUTO PARTS INDUSTRY AND GLOBAL AUTOMOBILE PRODUCTION TENDENCIES................................................................... 107 4.1 INTRODUCTION ................................................................................................... 109 4.2 AUTOMOBILE FIRMS ’ CLASSIFICATION ..................................................................... 109 A. OEM and After-Market Suppliers............................................................... 112 4.3 MAIN GLOBAL PRODUCTION TRENDS OF THE AUTOMOBILE INDUSTRY ........................... 112 A. Lean Production – The Toyota Model........................................................ 114 A.1. Automation and Lean Production in the Mexican Auto Industry ................................... 114 C. The Mexican Auto Parts Situation (1993-1996) ......................................... 115 4.4 REVIEW OF DATA ON THE MEXICAN AUTO PARTS INDUSTRY IN THE PRE - AND POST - NAFTA PERIOD .................................................................................................. 118 A. Database on Technology and Training....................................................... 119 A.1. Firm-level Characteristics ............................................................................................... 119 A.2. Linkages with Knowledge Centers.................................................................................. 123 B. Database on Auto Parts Firms – SIEM........................................................ 126 C. Local Content Integration Database – SEC................................................. 129 4.5 COMPARABILITY ACROSS DATABASES AND VARIABLES USED IN THIS RESEARCH ............... 130 CHAPTER 5 THE ADOPTION OF LEARNING MECHANISMS UNDER CHANGING MARKET CONDITIONS........................................................................... 133 5.1 INTRODUCTION ................................................................................................... 135 5.2 METHODOLOGY .................................................................................................. 135 A. Maximum Likelihood Estimation ............................................................... 136 B. Marginal Effects ......................................................................................... 137 5.3 DATA 137 A. Dependent Variables.................................................................................. 138 B. Explanatory Variables................................................................................. 139 5.4 DESCRIPTIVE STATISTICS ....................................................................................... 140 5.5 EMPIRICAL RESULTS ............................................................................................. 143 A. Pre-NAFTA Period (1991) ........................................................................... 143 8 5.6 PERIOD UNDER NAFTA ....................................................................................... 145 5.7 DISCUSSION OF FINDINGS ....................................................................................