Papers presented by Xavier Duran since 2019

2024 Providence, Rhode Island

"Why did US auto assemblers agglomerate in Detroit? The role of industrial organization of the city and mass production"

Abstract:

Paper co-authored with Ramana Nanda, HBS and Olav Sorenson, UCLA Why did US auto assemblers agglomerate in Detroit? We explore this question by examining contemporary accounts of the evolution of the industry and identify key factors overlooked in the discussion of this question. The narrative explores the role of two different forces on the agglomeration of the US auto industry in Detroit. First, we explore the role that the industrial organization of the city played in inducing innovation in the auto industry and generating agglomeration forces. Particularly important for assembly intensive manufacturing like that of the early auto industry is inter-firm coordination. Our narrative highlights the development of hand-to-mouth inventory systems (similar to just in time) and the prevalence of auto parts supplier’s credit. At the turn of the 20th century only a relatively tight spatial and social network facilitated physical movement of parts from one site to another and trust for credit to flow where most experimentation was needed: auto product development. Second, we explore the influence of mass production on agglomeration. Once the uncertainty of auto (product) design and the financial constraints to experimentation were reduced (at least to some firms), integration within a single firm of production of many auto parts and coordination of workers and specialized machines led to new assembly methods and even tighter spatial agglomeration of auto production. In sum, industrial organization of the city facilitated inter-firm coordination of auto assembly in an initial stage of the industry while mass production contributed to within firm coordination in the following stage. Both led to tighter levels of spatial agglomeration of production. This explanation to agglomeration of the auto industry in Detroit complements others like those that emphasize fights within firms that generated spin-offs and preexistence of a local strong wagon industry (Klepper 2007; Cabral et al 2018).

2023 Detroit, MI, United States

"Automobile assembly product life cycle and agglomeration"

Abstract:

Why did US auto assemblers agglomerate in Detroit? We explore this question by examining contemporary accounts of the evolution of the industry and identify a key factor that has been overlooked in the discussion of this question. Contemporary accounts suggest that the industrial organization of the city played an important role inducing innovation in the auto industry and generated agglomeration forces. Particularly important for an assembly intensive industry like the early auto industry are the development of hand-to-mouth inventory systems (similar to just in time) and auto parts supplier’s credit that allowed a typical Detroit auto producer to use auto parts from diverse suppliers to assemble about 5 cars per day and receive 90 days credit from auto parts suppliers. Such a high level of inter-firm coordination at the turn of the 20th century could only be sustained by a relatively tight spatial and social network that facilitated physical movement of parts from one site to another and trust for credit to flow where most experimentation was needed at the time, in the assembly stage. Preliminary quantitative analysis suggests that indeed a measure of medium sized city, closer ethnic distance, auto industry diversity and supplier’s credit are correlated with a measure of agglomeration. In sum, we identity a new hypothesis explaining why medium sized cities with small manufacturing districts and tight physical and social networks helped to coordinate auto parts design, inter-firm flows and trade finance to facilitate experimentation where it was required most at the time, in the assembly stage. This explanation to agglomeration of the auto industry in Detroit complements others like those that emphasize fights within firms that generated spin-offs and preexistence of a local strong wagon industry (Klepper 2007; Cabral et al 2018)

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2022 Mexico City

"My Best Frenemy - International Non-Market Strategies and Corporate Diplomacy: Standard Oil of New Jersey and the Panama Reparations"

Abstract:

This paper advances the concept of international nonmarket strategy to study actions by multinational corporations (MNCs) to influence the diplomatic and political relations between their home country and the host country. We maintain that the MNC can use its business and political networks at the home country to increase the host government’s bargaining power vis-à-vis the home and obtain business benefits in return. The MNC’s capabilities to have political influence at the home country, however, can also become a source of risk: a host government can have the incentive to use the MNC’s sunk assets in the host country as ‘hostages’ in order to have the MNC use its political capabilities on its behalf at the home country. We illustrate this argument with the historical case of the role played by Standard Oil of New Jersey in the negotiations between Colombia and the United States over the reparations for the loss of Panama in the 1920s. The paper shows the implications to international business theory and the benefits of using historical evidence.

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