International Production and the Digital Economy^*

Abstract

Digitalisation has become a central theme in the current economic and policy debate. Large digital and tech multinational enterprises (MNEs) are gaining an outsized role in the global economy. Also, the adoption of advanced digital technologies across all industries is fundamentally changing production processes. Both these (interrelated) phenomena have profound implications for economic structures, employment, inequality and development and industrialisation opportunities. This chapter analyses the international production and investment (i.e., foreign direct investment [FDI]) implications of the digital economy. First, it empirically documents significant differences in internationalisation patterns between the largest digital MNEs and traditional MNEs; particularly, the tendency of digital MNEs to exhibit an asset-light international footprint. Second, it argues that the powerful transformational forces related to digital adoption and the new industrial revolution have the potential to change international production more broadly, favouring a shift towards internationalisation models characterised by decentralised production, accelerated servicification and extended disintermediation. The chapter concludes with investment policy implications and a number of questions for future research.

Citation

Bolwijn, R., Casella, B. and Zhan, J. (2018), "International Production and the Digital Economy^*", van Tulder, R., Verbeke, A. and Piscitello, L. (Ed.) International Business in the Information and Digital Age (Progress in International Business Research, Vol. 13), Emerald Publishing Limited, Leeds, pp. 39-64. https://doi.org/10.1108/S1745-886220180000013003