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This paper is motivated by two observations in the large civil aircraft (LCA) industry. (1) Boeing and Airbus are significantly different in the degree of offshoring. (2) The degree of offshoring also changes among different aircraft models. To offer an explanation, this paper focuses on issues related to fragmentation. Existing literature has established the tie between fragmented technology and offshoring. However, it is assumed that production can be fragmented readily and at no cost; and only exogenous global economic factors have impact on the degree of fragmentation. This model distinguishes itself from others by incorporating endogeneity in fragmentation. A final-good firm can spend on R&D specifically for its own fragmented technology. As a result, the final-good firm can optimally choose the portion of components to be offshored. A strategic trade policy model is used to show that the degree of offshoring depends on the firm's own cost of production, the host country's cost of production, the global state of technology as well as the government trade policies. In particular, export subsidy and subsidy on R&D of fragmented technology are shown to be policy substitutes. Keywords: Fragmentation; Offshoring; Outsourcing; Aircraft; Export subsidy; R&D subsidy; Boeing; Airbus JEL classification: F12; F13; F23; L13
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In his most quoted study Imagined Communities, Benedict Anderson argues that the invention of the printing press and the rise of print media contributed to a textual representation of the concept of the nation and nationalism. He states that ‘popular’ print culture was also crucial in its contribution to a global exchange that would have reinforced the idea of an ‘imagined community’.1 Anderson further explains that before the eighteenth century, the concept of nation was extensive, as Latin was the language of a broad, vast, imagined community called ‘Christendom’, but as there were changes in the religious communities, such a concept began to be replaced by French and English as vernacular languages of administrative centralization.2 Thus, print capitalism allied to the book market supported by the improvement of communications and the emergence of new and diverse forms of national languages, originated the creation of clusters of small creole ‘imagined political communities’ that were eager to promote new forms of national and cultural consciousness, aimed at widespread literacy through liens of kinship, ethnicity, fraternity, and power loyalties.3 This chapter posits that Anderson's arguments regarding creole nationalism in the new world, fit the particular case of the emergence of the printing, publishing and book-selling culture among a Euro-creole bourgeoisie from Macao with solid kinship, ethnic, commercial and social connections in Hong Kong, Canton, Shanghai and other littoral spaces in the treaty ports in East Asia, and takes these developments as a necessary point of departure. I argue that they used the widespread nature of print media to empower themselves and other community members with the progressive eighteenth-century Enlightenment ideas on rational scientific knowledge. They embraced atheism and anti-clericalism as important elements of enlightenment, thus promoting scientific culture, constitutional monarchy or republican forms of government, social mobility for ethnic minorities, and religious and intellectual tolerance that to a certain extent challenged the Catholic Church and conservative circles.
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