Production Networks and Unbundling: Reformulating the Conceptual Framework in Theory, Empirics, and Policy Discussion

Abstract

This paper employs the concept of “unbundling” proposed by Baldwin (2016) and provides an overview of the dynamic transformation of the pattern of international division of labor in East Asia from the viewpoint of theory, empirics, and policy discussion. East Asia has led the world in aggressively utilizing the second unbundling, or the mechanics of international production networks centered by machinery industries. Yet there is still ample room for expanding and deepening the involvement in such a pattern of international division of labor. At the same time, a wave of digital technology has arrived in East Asia, and the application of new information and communication technology (ICT) and the third unbundling have become important policy agenda items. This paper concisely presents the conceptual framework of “unbundling,” particularly the second and the third, and discusses a number of issues on empirical studies and policy discussion over development strategies and required sets of policies.