The importance of the logistic infrastructure for the unbundling of
production is also implicit in various frameworks of the production fragmentation
theory (Jones and Kierzkowski, 1990; Deardorff, 2001a,b).
Central to these models is the notion that firms fragment a production
process into various production blocks and relocate them to places
with different location advantages as long as the resulting saved costs
from the fragmentation outweigh the additional costs of coordinating
and moving the production blocks around. The latter is inherently
dependent on the logistic systems in place.
While the role of logistics seems prominent in the case studies and in
some theoretical frameworks, there is no systematic empirical analysis
assessing the extent towhich the quality of logistic infrastructure affects
the location of vertical FDI. Most studies of the determinants of FDI
address the issue of logistics and transportation by examining the effect
of distance on the relevant outcome