'Factoryless' manufacturers, as defined by the U.S. OMB, perform underlying entrepreneurial components of arranging the factors of production but outsource all of the actual transformation activities to other specialized units. This paper describes efforts to measure 'factoryless' manufacturing through analyzing data on contract manufacturing services (CMS). We explore two U.S. firm surveys that report data on CMS activities and discuss challenges with identifying and collecting data on entities that are part of global value chains.
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A Portrait of U.S. Factoryless Goods Producers
October 2018
Working Paper Number:
CES-18-43
This paper evaluates the U.S. Census Bureau's most recent data collection efforts to classify business entities that engage in an extreme form of production fragmentation called 'factoryless' goods production. 'Factoryless' goods-producing entities outsource physical transformation activities while retaining ownership of the intellectual property and control of sales to customers. Responses to a special inquiry on the incidence of purchases of contract manufacturing services in combination with data on production inputs and outputs, intellectual property, and international trade is used to identify and document characteristics of 'factoryless' firms in the U.S. economy.
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The Changing Firm and Country Boundaries of US Manufacturers in Global Value Chains
July 2023
Working Paper Number:
CES-23-38
This paper documents how US firms organize goods production across firm and country boundaries. Most US firms that perform physical transformation tasks in-house using foreign manufacturing plants in 2007 also own US manufacturing plants; moreover manufacturing comprises their main domestic activity. By contrast, 'factoryless goods producers' outsource all physical transformation tasks to arm's-length contractors, focusing their in-house efforts on design and marketing. This distinct firm type is missing from standard analyses of manufacturing, growing in importance, and increasingly reliant on foreign suppliers. Physical transformation 'within-the-firm' thus coincides with substantial physical transformation 'within-the-country,' whereas its performance 'outside-the-firm' often also implies 'outside-the-country.' Despite these differences, factoryless goods producers and firms with foreign and domestic manufacturing plants both employ relatively high shares of US knowledge workers. These patterns call for new models and data to capture the potential for foreign production to support domestic innovation, which US firms leverage around the world.
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Multinational Firms in the U.S. Economy: Insights from Newly Integrated Microdata
September 2022
Working Paper Number:
CES-22-39
This paper describes the construction of two confidential crosswalk files enabling a comprehensive identification of multinational rms in the U.S. economy. The effort combines firm-level surveys on direct investment conducted by the U.S. Bureau of Economic Analysis (BEA) and the U.S. Census Bureau's Business Register (BR) spanning the universe of employer businesses from 1997 to 2017. First, the parent crosswalk links BEA firm-level surveys on U.S. direct investment abroad and the BR. Second, the affiliate crosswalk links BEA firm-level surveys on foreign direct investment in the United States and the BR. Using these newly available links, we distinguish between U.S.- and foreign-owned multinational firms and describe their prevalence and economic activities in the national economy, by sector, and by geography.
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Measuring the Electronic Economy: Current Status and Next Steps
June 2000
Working Paper Number:
CES-00-10
The recent growth of consumer retailing over the Internet draws attention to the electronic economy. However, businesses also conduct other business processes over computer networks, and many have been doing so for some time. Uses of computer networks attract attention because of assertions that they lead to new products and services, new delivery methods, streamlined or re-engineered business processes, new business structures, and enhanced business performance. These changes, in turn, potentially affect the performance of the entire economy, including economic growth, productivity, prices, employment, trade, and the structures of businesses, regions, and markets. Evaluating these assertions, and their effects on economic performance, requires solid statistical information about the electronic economy. This paper develops principles for identifying information critical to measuring the size and evaluating the potential effects of the electronic economy, relates that information to current data collection programs, and notes relevant measurement issues. Some of the required information about the electronic economy can be collected by adding questions to existing surveys, making the scope of existing surveys consistent, or developing new surveys. However, many key pieces of information pose significant challenges to economic measurement. While some of those challenges are specific to the electronic economy, others are long-standing ones. Interest in the electronic economy highlights the importance of continuing attempts to address these challenges. Improving and enhancing the statistical system to provide information about the electronic economy, therefore, would also substantially improve the baseline information available for evaluating the performance of the entire economy.
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The Impact of Information and Communication Technology Adoption on Multinational Firm Boundary Decisions
January 2016
Working Paper Number:
CES-16-01
This paper evaluates the effect of adopting internet-enabled information and communication technology (ICT) adoption on the decision to reorganize production across national borders (foreign boundary decision) by multinational enterprises (MNE). Using a transaction cost framework, we argue that ICT adoption influences foreign boundary decisions by lowering coordination costs both internally and externally for the firm. We propose that the heterogeneity in the technology's characteristics, namely complexity and the production processes' degree of codifiability, moderate this influence. Using a difference-in-differences methodology and exploiting the richness of confidential U.S. Census Bureau microdata, we find that overall ICT adoption is positively associated with greater likelihood of in-house production, as measured by increases in intra-firm trade shares. Furthermore, we find that more complex forms of ICT are associated with larger increases in intra-firm trade shares. Finally, our results indicate that MNEs in industries in which production specifications are more easily codified in an electronic format are less likely to engage in intra-firm relative to arms-length trade following ICT adoption.
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Import Competition from and Offshoring to Low-Income Countries: Implications for Employment and Wages at U.S. Domestic Manufacturers
January 2017
Working Paper Number:
CES-17-31
Using confidential linked firm-level trade transactions and census data between 1997 and 2012, we provide new evidence on how American firms without foreign affiliates adjust employment and wages as they adapt to import competition from low-income countries. We provide stylized facts on the input sourcing strategies of these domestic firms, contrasting them with multinationals operating in the same industry. We then investigate how changes in firm input purchases from low-income countries as well as domestic market import penetration from these sources are correlated with changes in employment and wages at surviving domestic firms. Greater offshoring by domestic firms from low-income countries correlates with larger declines in manufacturing employment and in the average production workers' wage. Given the negative association, however, the estimated magnitudes are small, even for a narrow measure of offshoring that includes only intermediate goods. Import penetration of U.S. markets from these sources is associated with relatively larger changes in employment for arm's length importing firms, but has no significant correlation with employment changes at firms that do not trade. Given differences in the degree of both offshoring and import penetration, we find substantial variation across industries in the magnitude of changes associated with low-income country imports.
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The Role of Industry Classification in the Estimation of Research and Development Expenditures
November 2014
Working Paper Number:
CES-14-45
This paper uses data from the National Science Foundation's surveys on business research and development (R&D) expenditures that have been linked with data from the Census Bureau's Longitudinal Business Database to produce consistent NAICS-based R&D time-series data based on the main product produced by the firm for 1976 to 2008.The results show that R&D spending has shifted away from domestic manufacturing industries in recent years. This is due in part to a shift in U.S. payrolls away from manufacturing establishments for R&D-performing firms.These findings support the notion of an increasingly fragmented production system for R&D-intensive manufacturing firms, whereby U.S. firms control output and provide intellectual property inputs in the form of R&D, but production takes place outside of the firms' U.S. establishments.
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THE INFLUENCES OF FOREIGN DIRECT INVESTMENTS, INTRAFIRM TRADING, AND CURRENCY UNDERVALUATION ON U.S. FIRM TRADE DISPUTES
January 2014
Working Paper Number:
CES-14-04
We use the case of a puzzling decline in U.S. firm antidumping (AD) filings to explore how firm-level economic heterogeneity within U.S. industries influences political and regulatory responses to changes in the global economy. Firms exhibit heterogeneity both within and across industries regarding foreign direct investment. We propose that firms making vertical, or resource-seeking, investments abroad will be less likely to file AD petitions. Hence, we argue, the increasing vertical FDI of U.S. firms (particularly in countries with undervalued currencies) makes trade disputes far less likely. We use firm level data to examine the universe of U.S. manufacturing firms and find that AD filers generally conduct no intrafirm trade with filed-against countries. Among U.S. MNCs, the number of AD filings is negatively associated with increases in the level of intrafirm trade for large firms. In the context of currency undervaluation, we confirm the existing finding that undervaluation is associated with more AD filings. We also find, however, that high levels of related-party imports from countries with undervalued currencies significantly decrease the numbers of AD filings. Our study highlights the centrality of global production networks in understanding political mobilization over international economic policy. [192]
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Documenting the Business Register and Related Economic Business Data
March 2016
Working Paper Number:
CES-16-17
The Business Register (BR) is a comprehensive database of business establishments in the United States and provides resources for the U.S. Census Bureau's economic programs for sample selection, research, and survey operations. It is maintained using information from several federal agencies including the Census Bureau, Internal Revenue Service, Bureau of Labor Statistics, and the Social Security Administration. This paper provides a detailed description of the sources and functions of the BR. An overview of the BR as a linking tool and bridge to other Census Bureau data for additional business characteristics is also given.
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Measuring U.S. Innovative Activity
March 2007
Working Paper Number:
CES-07-11
Innovation has long been credited as a leading source of economic strength and vitality in the United States because it leads to new goods and services and increases productivity, leading to better living standards. Better measures of innovative activities'activities including but not limited to innovation alone'could improve what we know about the sources of productivity and economic growth. The U.S. Census Bureau either currently collects, or has collected, data on some measures of innovative activities, such as the diffusion of innovations and technologies, human and organizational capital, entrepreneurship and other worker and firm characteristics, and the entry and exit of businesses, that research shows affect productivity and other measures of economic performance. But developing an understanding of how those effects work requires more than just measures of innovative activity. It also requires solid statistical information about core measures of the economy: that is, comprehensive coverage of all industries, including improved measures of output and sales and additional information on inputs and purchased materials at the micro (enterprise) level for the same economic unit over time (so the effects can be measured). Filling gaps in core data would allow us to rule out the possibility that a measure of innovative activity merely proxies for something that is omitted from or measured poorly in the core data, provide more information about innovative activities, and strengthen our ability to evaluate the performance of the entire economy. These gaps can be filled by better integrating existing data and by more structured collections of new data.
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