Fragmentation (economics)

In economics, fragmentation means organization of production in which different stages of production are divided among different suppliers that are located in different countries. Now products traded between firms in different countries are components instead of final products. Final products may be sold to outside the region in which fragmentation happens (East Asian countries often sell their final products to Europe and the USA for example). Producers in less developed countries get positions of production chain that add less value to final product. Their challenge is to "climb upwards" on transnational production chain. Production chains are often vertical hierarchies in which big multinational companies may be those who sell final products and set production standards for "lesser" producers. This kind of fragmentation is an important part of contemporary globalization.