Foreign investment and the global geography of production: Why the Mexican consumer electronics industry failed

Explanations of industrial development in late-developing countries have become narrowly focused on the capability of governments to promote, pressure, or punish nationally-owned firms. Often overlooked is the contribution of firms, both national and multinational, in propelling, coordinating, and determining the path and location of such development. This paper examines the conditions that led to the decline of Mexico's consumer electronics industry and presents new evidence to support a more complex account of the role of both industrial and state actors within this process. In contrast to the traditional market- or state-based theories, we argue that the decline of Mexico's consumer electronics industry largely resulted from its foreign investment regime, particularly the timing of investment and the geographical locations of local and foreign manufacturers, and the subsequent depth and quality of the relationships between these firms. The differences between Mexico's regime and that of Taiwan during the same period provide further evidence of the important role that foreign firms play in inserting local suppliers into the global production chain. We argue that Mexico's foreign investment regime and the resulting weak local-foreign ties, rather than inadequate state policy, sealed the fate of Mexico's once thriving domestic electronics industry.