Global Economy Journal

This paper highlights the need for the emerging market firms to take a strategic approach to build capabilities for resiliency in the face of frequent macro economic crises, even if each crisis is anticipated to be temporary and short-term in nature. A knowledge-based model is developed to highlight the dynamics of interaction between the emerging market vendors and the industrial market clients, as the latter restructure their offshoring contracts in the face of a financial crisis. The model shows the strategic solutions that the emerging market vendors have to transform the situation of crisis into a window of opportunity. In addition, the model provides insights into how the industrial market firms may also moderate the effects of an economic crisis by adopting a strategic knowledge exchange approach (i.e., appropriate capability development), instead of the common reliance on a strategic compensation approach (i.e., lower prices or profits).

This paper uses changes in intra-industry specialization indicators to assess factor adjustment pressures that may have been experienced by U.S. industries as a result of growth in U.S.-Mexico trade over the North American Free Trade Agreement (NAFTA) implementation period. Many industries experienced large increases in intra-industry trade. Few U.S. industries were candidates for significant factor adjustment pressures. Industries facing adjustment pressures accounted for nineteen percent of total U.S. imports from Mexico. Findings should lessen opposition to the North American Free Trade Agreement and future regional integration initiatives in the Western Hemisphere by easing fears that jobs will disappear.