Value Capture in the Global Electronics Industry: Empirical Evidence for the “Smiling Curve” Concept

By Namchul Shin, Kenneth L. Kraemer, Jason L. Dedrick. 2012

149 citations recorded by the source corpus.

This research asks who captures the greatest value in the global electronics industry by testing the concept of the “smiling curve”, which predicts that the greatest value is captured by upstream and downstream firms, and the lowest value is captured in the middle of the value chain. We test the concept using the Electronic Business 300 data-set for 2000–2005. We find that lead firms and component suppliers earn higher gross margins and net margins compared to contract manufacturers. However, the differences are minimal for return on assets (ROA) and return on equity (ROE). We also find that active component suppliers gain higher profits than passive component suppliers. These findings suggest that the smiling curve is right if value is defined in terms of gross margins, but the cost of sustaining a position on either end of the curve is so high that returns on investment are similar across the curve.

Subfields: Accounting, Economics and Econometrics, Strategy and Management

View Paper: https://www.semanticscholar.org/paper/4432579960249e54cfe321ec62aee6796f7d6196

Citations in the corpus

• How should we understand the digital economy in Asia? Critical assessment and research agenda (2020, unknown): “The theory tells us that high value-added lies at both ends of the curve, representing the downstream and upstream ends of the value chain, while the processing and assembly activities are in the middle of the curve, which is the lowest value-added region (Shin et al., 2012).”
• Measuring Smile Curves in Global Value Chains (2020, unknown): “The smile curve logic has been widely used and discussed in the context of GVCs (e.g., Mudambi, 2008; Shin et al., 2012).”