Globalization and increasing returns: Implications for the US computer industry

Over the last twenty years, the computer industry has become global with re spect to computer production as well as computer use, a trend which has rai sed concerns among U.S. policymakers of hollowing out the industry and expo rting employment. This paper uses the framework of increasing returns to an alyze the issue. It classifies market segments within the computer industry , shows how the advent of the personal computer created these segments, exa mines how this change in the structure of the industry led to the evolution of an Asia-Pacific production network, identifies company and country lead ership in this network, and evaluates the implications for the United State s. It shows that some manufacturing employment, mainly in the decreasing re turns segments of the industry, has shifted to the Asia-Pacific region. How ever, it also shows that employment in some manufacturing segments and in s oftware and services, which are increasing returns or hybrid markets, has i ncreased dramatically in the United States. It concludes that the global di vision of labor between the United States and both companies and countries in the Asia-Pacific region has been largely positive in that it has support ed the continuing U.S, leadership position in the global computer industry.