Chapter 9: Location, control and firm innovation: the case of the mobile handset industry
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The first industrial revolution that began in eighteenth-century England was based on technological innovations that produced a wide range of machinery and the factory system. This revolution replaced expensive uniqueness of craft manufacture and locally specialized agriculture industry with the cheap standardization of mass production (Crafts, 1985). Through the twentieth century the basic human desire for individual identity and uniqueness has inexorably chipped away at the basic mass production model, initially creating larger margins for firms implementing differentiation strategies (Porter, 1985). This process has recently accelerated to a torrent whereby ‘mass customization’ and ‘mass personalization’ (Kotha, 1995; Tseng et al., 2010) are rapidly consigning mass production to the pages of economic history. The first industrial revolution marked a dramatic and discontinuous upward shift in the value of commercial knowledge. For the next two centuries the bulk of this knowledge was embodied in tangible assets. Over the last several decades the world economy has been witnessing what can only be described as another revolution in terms of the nature of value creation. The source of value has been shifting from tangible to intangible assets at an accelerating pace. For all the G7 economies put together, intangible assets have been estimated to constitute about 30 percent of the stock of all long-term assets (IMF, 2006). This shift is occurring through the emergence of technologies and institutions that have made it increasingly cost effective to separate intangible assets from their associated tangible assets.

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