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Global Value Chains in a Post-Washington Consensus World

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Contemporary globalization has been marked by significant shifts in the organization and governance of global industries. In the 1970s and 1980s, one such shift was characterized by the emergence of buyer-driven and producer-driven commodity chains. In the 1990s and early 2000s, a more differentiated typology of governance structures was introduced that focused on new types of coordination in global value chains (GVCs). Today the organization of the global economy is entering another phase, with transformations that are reshaping the governance structures of both GVCs and global capitalism at various levels: (1) the end of the Washington Consensus, and the rise of contending centers of economic and political power; (2) a combination of geographic consolidation and value chain concentration in the global supply base, which in some cases is shifting bargaining power from lead firms in GVCs to large suppliers in developing economies; (3) new patterns of strategic coordination among value chain actors; (4) a shift in the end markets of many GVCs accelerated by the economic crisis of 2008-09, which reinforces regional geographies of investment and trade; and (5) a diffusion of the GVC approach to major international donor agencies, which is prompting a reformulation of established development paradigms.
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Global value chains in a post-
Washington Consensus world
Gary Gereffi
a
a
Department of Sociology, Duke University, Durham,
NC, USA
Published online: 06 Mar 2013.
To cite this article: Gary Gereffi (2013): Global value chains in a post-
Washington Consensus world, Review of International Political Economy,
DOI:10.1080/09692290.2012.756414
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http://dx.doi.org/10.1080/09692290.2012.756414
Global value chains in a post-Washington
Consensus world
Gary Geref
Department of Sociology, Duke University, Durham, NC, USA
ABSTRACT
Contemporary globalization has been marked by significant shifts in the
organization and governance of global industries. In the 1970s and 1980s,
one such shift was characterized by the emergence of buyer-driven and
producer-driven commodity chains. In the early 2000s, a more differentiated
typology of governance structures was introduced, which focused on new
types of coordination in global value chains (GVCs). Today the organization
of the global economy is entering another phase, with transformations that
are reshaping the governance structures of both GVCs and global capitalism
at various levels: (1) the end of the Washington Consensus and the rise of
contending centers of economic and political power; (2) a combination of ge-
ographic consolidation and value chain concentration in the global supply
base, which, in some cases, is shifting bargaining power from lead firms in
GVCs to large suppliers in developing economies; (3) new patterns of strate-
gic coordination among value chain actors; (4) a shift in the end markets of
many GVCs accelerated by the economic crisis of 2008–09, which is redefin-
ing regional geographies of investment and trade; and (5) a diffusion of the
GVC approach to major international donor agencies, which is prompting a
reformulation of established development paradigms.
KEYWORDS
Globalization; development; global value chains; global commodity chains;
Latin America; East Asia; import-substituting industrialization (ISI); export-
oriented industrialization (EOI); value-added trade.
I. VIEWING THE GLOBAL ECONOMY THROUGH
A VALUE-CHAIN LENS
Globalization has given rise to a new era of international competition that is
reshaping global production and trade and altering the organization of in-
dustries (Gereffi, 2011). Since the 1960s, international companies have been
C
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slicing up t heir supply chains in search of low-cost and capable suppliers
offshore. The literature on ‘the new international division of labor traced
the surge of manufactured exports from the Third World to the establish-
ment of labor-intensive export platforms set up by multinational firms
in low-wage areas (Fr
¨
obel et al., 1981). This was typified by the American
production-sharing or ‘twin plant’ program with Mexico and the German
export-processing zones for apparel assembly in Central and Eastern
Europe. The pace of offshore production soon accelerated dramatically and
took new organizational forms (Dicken, 2011). In the 1970s and 1980s, US
retailers and brand-name companies joined manufacturers in the search
for offshore suppliers of most categories of consumer goods, which led
to a fundamental shift from what had been ‘producer-driven’ commodity
chains to ‘buyer-driven’ chains. The geography of these chains expanded
from regional production-sharing arrangements to full-fledged global
supply chains, with a growing emphasis on East Asia (Gereffi, 1994, 1996).
In the 1990s and 2000s, the industries and activities encompassed by
global supply chains grew exponentially, covering not only finished goods,
but also components and subassemblies, and affecting not just manufactur-
ing industries, but also energy, food production and all kinds of services,
from call centers and accounting to medical procedures and research and
development (R&D) activities of the world’s leading transnational corpo-
rations ( Engardio et al., 2003; Engardio and Einhorn, 2005; Wadhwa et al.,
2008). Since the early 2000s, the global value chain (GVC) and global pro-
duction network (GPN) concepts gained popularity as ways to analyze the
international expansion and geographical fragmentation of contemporary
supply chains (Gereffi et al., 2001; Dicken et al., 2001; Henderson et al., 2002;
Gereffi, 2005).
There are numerous reviews of the distinctive features of the global
commodity chain (GCC) and the GVC and GPN approaches to analyzing
global supply chains.
1
In general, they all characterize the global econ-
omy as consisting of complex and dynamic economic networks made
up of inter-firm and intra-firm relationships. However, it is equally true
that there are national and international political underpinnings to the
shifts in global supply chains that have taken place over the past four
decades. In the 1960s and 1970s, the key players in most international
industries were large, vertically integrated transnational corporations
(Vernon, 1971) and their link to the growing markets of developing
countries was primarily via the import-substituting industrialization (ISI)
model of growth that had been well established in Latin America, Eastern
Europe and parts of Asia since the 1950s. The ‘East Asian miracle’ (World
Bank, 1993), based on the rapid economic advance of Japan and the so-
called East Asian tigers (South Korea, Taiwan, Hong Kong and Singapore)
since the 1960s, highlighted a contrasting development model: export-
oriented industrialization (EOI) (Gereffi and Wyman, 1990). Buttressed by
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GEREFFI: GVCs IN A POST-WASHINGTON CONSENSUS WORLD
the neoliberal thrust of the Reagan and Thatcher governments in the US
and the UK, respectively, export-oriented development became the prevail-
ing orthodoxy for developing economies around the world. This model
came to be known as the ‘Washington consensus,’ and EOI was lauded for
giving many small economies in the developing world the opportunity to
benefit from scale economies and to learn from exporting to much larger
trade partners, thereby overcoming the bias of the ISI model toward the
limited number of developing countries with large domestic markets.
The death knell f or ISI, especially in Latin America, came from the oil
shock of the late 1970s and the severe debt crisis that followed it (Urquidi,
1991). The ISI approach had devised no way to generate the foreign ex-
change needed to pay for increasingly costly imports, and escalating debt
service payments led to a net outflow of foreign capital that crippled eco-
nomic growth. When many developing countries, under pressure from the
International Monetary Fund (IMF) and the World Bank, made the tran-
sition from ISI to EOI during the 1980s (Geref and Wyman, 1990), there
was an equally profound reorientation in the strategies of transnational
corporations. The rapid expansion of industrial capabilities and export
propensities in a diverse array of newly industrializing economies in Asia
and Latin America allowed transnational corporations to accelerate their
own efforts to outsource relatively standardized activities to lower-cost
production locations worldwide. It is precisely this change in the strate-
gies of transnational companies that enabled the shift from ISI to EOI
in developing economies, and it corresponds to the shift from producer-
driven to buyer-driven commodity chains at the level of global industries
(Geref and Korzeniewicz, 1994).
2
However, the development story for East Asia and other newly in-
dustrializing economies cannot be captured solely through a contrast
of the ISI and EOI models, since the shift from ISI to EOI was not
total or uncontested in either East Asia or Latin America. Indeed, el-
ements of both strategies were intertwined since countries tended to
move from relatively easy to more difficult phases of both ISI and EOI
over time (Gereffi and Wyman, 1990). In addition, the growth of GPNs
has been linked to rising levels of income inequality, within and be-
tween countries, which can be explained in large measure by the dy-
namics of rents in GVCs, which are increasingly determined by intan-
gible assets (such as copyrights, brand names and design) as more tan-
gible barriers to entry in manufacturing have tended to fall (Kaplinsky,
2000). In the wake of the 2008–09 global economic crisis, the rapid
growth of productive capabilities in China, India and other large emerging
economies has created a profound shift in global demand for both finished
goods and intermediates from North to South, with both positive and
negative implications for developing country exporters (Kaplinsky and
Farooki, 2011).
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Today, the organization of the global economy is entering a new phase,
or what some have referred to as a ‘major inflection point’ (Fung, 2011),
which could have dramatic implications for economic and social upgrad-
ing and downgrading among countries, firms and workers. The role of the
‘Washington consensus’ as a paradigm for developing countries has been
severely weakened (Gore, 2000) and no alternative development strategy
has taken its place. Thus, our analysis of GVCs in this post-Washington
Consensus world must not only take account of changes in the organiza-
tion of production and trade on a global scale, but also examine the role of
emerging economies as new sources of demand and production compe-
tencies in the global economy. The increasing importance of GVCs in the
current era challenges the traditional way of measuring countries’ export
performance and international competitiveness, and it suggests that the
post-crisis futures of advanced industrial and developing economies are
interdependent to a hitherto unprecedented degree.
The remaining sections of this paper are organized as follows. First,
recent trends in GVC governance reveal a growing consolidation in the
supply base among both countries and firms, and we argue that geo-
graphic consolidation is facilitating the co-evolution of more concentrated
lead firms, suppliers and intermediaries in GVCs. Second, the evolution
of GVCs has altered our basic notions of how and where economic devel-
opment occurs, which is illustrated by the growing importance of value-
added trade and shifting end markets for GVCs, which are giving rise to
new patterns of regionalization in the global economy. Third, the GVC
framework has become increasingly prominent in the development agen-
das of a diverse array of bilateral and multilateral donor organizations,
which is leading to a greater focus on showing how vertically coordi-
nated trade and investment patterns in the global economy can be linked
to employment outcomes and a renewed concern with social upgrad-
ing. Conclusions will be drawn about how these interrelated changes are
likely to shape economic and social welfare in emerging models of global
development.
II. GOVERNANCE STRUCTURES AND INCREASING
CONCENTRATION IN GLOBAL VALUE CHAINS
The GVC framework focuses on globally expanding supply chains and
how value is created and captured therein. By analyzing the full range of ac-
tivities that firms and workers perform to bring a specific product from its
conception to its end use and beyond, the GVC approach provides a holistic
view of global industries from two contrasting vantage points: top down
and bottom up. The key concept for the top-down view is the ‘governance’
of GVCs, which focuses mainly on lead firms and the organization of global
industries; the main concept for the bottom-up perspective is ‘upgrading,’
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which focuses on the strategies used by countries, regions and other eco-
nomic stakeholders to maintain or improve their positions in the global
economy (Geref and Fernandez-Stark, 2011). Recent trends related to
GVC governance will be discussed in this section of the paper, and the links
between economic and social upgrading and new forms of value-added
trade and shifting end markets in GVCs will be the focus of the next section.
Governance is a centerpiece of GVC analysis. It shows how corporate
power can actively shape the distribution of profits and risks in an in-
dustry, and it identifies the actors who exercise such power. Within the
chain, power at the firm level can be exerted by lead firms or suppliers.
In ‘producer-driven’ chains, power is held by final-product manufacturers
and is characteristic of capital-, technology- or skill-intensive industries.
In ‘buyer-driven’ chains, retailers and marketers of final products exert the
most power through their ability to shape mass consumption via domi-
nant market shares and strong brand names.
3
They source their products
from a global network of suppliers in cost-effective locations to make their
goods. The most notable form of ‘supplier power comes via platform
leadership (e.g., firms that exhibit marketing or technological dominance,
which allows them to set standards and get higher returns for their prod-
ucts), although supplier power typically is not associated with the explicit
coordination of buyers or other downstream value chain actors (Frederick
and Gereffi, 2009; Sturgeon, 2009).
The role played by lead fi rms is highlighted in various typologies of GVC
governance. The initial distinction between producer-driven and buyer-
driven commodity chains was introduced in the mid-1990s in order to
mark the rise of global buyers in the 1970s and 1980s as retailers and brand
marketers began to set up international sourcing networks to procure con-
sumer goods directly from offshore suppliers, mainly in East Asia (Gereffi,
1994, 1999). These ‘full-package’ production networks based on local sup-
pliers supplanted many of the assembly-oriented production networks
initially set up by multinational manufacturers based in the developed
economies (Bair and Gereffi, 2001). However, as t he case studies of GVCs
proliferated, and more industries and countries were incorporated into
the analysis, it was clear that the dichotomous categories of buyer-driven
and producer-driven commodity chains were too broad to capture the full
complexity of the GVC governance structures that were emerging in the
world.
In addressing this challenge, a new typology of GVC governance struc-
tures was elaborated, which sought both to describe and explain in a
parsimonious way the significant differences between various types of
value chains. Between the two extremes of classic markets and hier-
archies (i.e., vertical integration), three network forms of governance
were identified: modular, relational and captive (Geref et al., 2005). In
these network forms of GVC governance, the lead firm exercises varying
5
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Figure 1 Five types of global value chain governance.
Source: Gereffi, Humphrey and Sturgeon (2005: 89).
degrees of power through the coordination of suppliers without any direct
ownership of the firms (Figure 1).
The five-fold typology of GVC governance published by Gereffi,
Humphrey and Sturgeon (2005) has been very widely utilized and ex-
tensively cited, and it has become a mainstay of our conceptual toolkit on
GVC governance. One of the reasons for the popularity of this approach
is that it allows us to show quite easily how the form of governance can
change as an industry evolves and matures, and indeed how governance
patterns within an industry can vary from one stage or level of the chain
to another. For example, in the offshore services value chain, all five types
of GVC governance structures identified in the typology coexist, but their
role in upgrading varies according to the characteristics of suppliers in de-
veloping countries, the requirements of lead firms and the kinds of inter-
national professional standards utilized in these chains (Fernandez-Stark
et al., 2011). The impact of multiple and shifting forms of GVC governance
on the ability of local producers to upgrade within global chains has been
particularly notable in the agrifood sector (Dolan and Humphrey, 2004;
Geref et al., 2009; Lee et al., 2012), although the phenomenon exists in other
industries as well (Geref and Fernandez-Stark, 2011; Gereffi et al., 2011).
Today, we are entering a very different era. By the mid-2000s, the
Washington Consensus development model was already beginning to
unravel. US hegemony was eroding and the large emerging economies,
6
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GEREFFI: GVCs IN A POST-WASHINGTON CONSENSUS WORLD
led by China and India, were altering the organization of production and
how rules were made that affected the global economy. Consolidation was
growing at both the country and supply chain levels in a number of hall-
mark global industries, such as apparel ( Frederick and Gereffi, 2011; Staritz
and Frederick, 2012), automobiles (Sturgeon et al., 2008; Sturgeon and Van
Biesebroeck, 2011) and electronics (Sturgeon and Kawakami, 2011; Brandt
and Thun, 2011). When the global economic recession hit in 2008–09, this
ended all prospects of a return to the old order. As the consumption of ad-
vanced industrial economies was curtailed, developing countries around
the world began to look for alternatives to declining or stagnant northern
markets. Large emerging economies turned inward and redirected pro-
duction to their domestic markets and regional neighbors, and industrial
policy has become more prominent.
In this context, the governance structures of GVCs are changing as well.
The problem is no longer one of coordinating far-flung, fragmented and
highly specialized global supply chains through triangular production net-
works orchestrated by East Asian intermediaries (Gereffi, 1999). The ques-
tion increasingly posed by the transnational lead firms of GVCs is, ‘How
can we “rationalize” our supply chains from 300–500 suppliers to 25–30
suppliers?’ The new suppliers are expected to be bigger, more capable
and strategically located to access large markets. In this new environment,
the extreme asymmetries of power in favor of lead firms that characterized
the buyer-driven and producer-driven chains are shifting in many cases to-
ward the top manufacturers located in emerging economies such as China,
India, Brazil and Turkey. These countries have well-organized domestic
supply bases and they have moved up the value chain t o incorporate key
input suppliers, as well as pre-production (design, R&D and purchasing)
and post-production (logistics, marketing and branding) services.
Even in this post-Washington Consensus world, the established GVC
governance structures from prior decades still exist, and they will continue
to play an important role in shaping development agendas. However,
new governance structures are being created that reflect the realities of
GVCs today. This can be seen in the links between the organizational
consolidation occurring within GVCs and the geographic concentration
associated with the growing prominence of emerging economies as key
economic and political actors.
After 1989, the breakup of the Soviet Union, the opening of China to
international investment and trade, and the liberalization of India brought
a number of very large economies onto the global stage, known initially as
BRICs (Brazil, Russia, India and China).
4
This influenced the globalization
process, as GVCs began to concentrate in these giant countries that
offered seemingly inexhaustible pools of low-wage workers, capable
manufacturers, abundant raw materials and sizeable domestic markets.
Thus, China became the ‘factory of the world,’ India the world’s ‘back
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office,’ Brazil had a wealth of agricultural commodities, and Russia
possessed enormous reserves of natural resources plus the military
technologies linked to its role as a Cold War superpower. These emerging
economies became major production centers worldwide, although their
specific role in GVCs varied according to their openness to trade and
foreign investment and other strategic considerations.
Since 2000, the shift in production from North to South in the global econ-
omy has accelerated and an expanding number of high-growth economies
are playing prominent roles in a wide variety of industries as exporters
and also new markets (Staritz et al., 2011). This reflects multiple factors,
including the growing significance of emerging economies, the decline in
export orders due to t he global economic crisis of 2008–09, and the ex-
plicit efforts of GVC lead firms to rationalize their supply chains in order
to deal with smaller numbers of highly capable and strategically located
suppliers.
One noteworthy consequence of global consolidation is the growth of
big GVC producers and intermediaries, which tend to offset to some de-
gree the power of global buyers. China became the world’s dominant sup-
plier of apparel, footwear and consumer electronics products, especially
after the termination of the Multi-Fibre Arrangement (MFA) for apparel
in 2005, and giant contract manufacturers and traders (such as Foxconn in
electronics, Yue Yuen in footwear and Li & Fung in apparel) have consider-
able clout. India and Brazil have also generated their own manufacturing
multinationals, such as Tata and Embraer.
Lead firms themselves are getting bigger through mergers, acquisitions
and the decline of many rivals and, thereby, they are also increasing their
global market shares.
5
At the same time, there is growing awareness of the
strategic vulnerabilities of global supply chains in terms of the access of
lead firms to critical raw material supplies (Lynn, 2005). This is particu-
larly apparent in the agrifoods sector, where consumer goods firms such
as Cadbury, Coca-Cola, Unilever and others are expanding their direct
involvement in the procurement and sustainability of the raw material
sides of their value chains, such as cocoa, coffee and sugar. This is also
evident in autos and electronics, where concern over the availability of
raw materials, such as lithium and coltan (Nathan and Sarkar, 2011), re-
spectively, are introducing greater engagement between GVC lead firms
and host country suppliers and governments. Thus, the long-term trend
toward specialization and fragmentation in G VCs is being supplanted by
a greater emphasis on strategic collaboration.
In summary, concentration is growing across different segments of
GVCs, and this co-evolution of concentrated actors appears to have
two main implications for GVC governance: in at least some cases, a
shift of bargaining power toward large domestic producers vis-
`
a-vis
global buyers; and an affinity between geographic concentration in large
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GEREFFI: GVCs IN A POST-WASHINGTON CONSENSUS WORLD
emerging economies such as China and India and organizational consol-
idation in GVCs. Novel patterns of industrial organization in emerging
economies seem to fit this pattern, including China’s supply chain cities,
which integrate all aspects of GVCs from input suppliers to final goods
manufacturers, and design centers to showrooms, for global buyers
within specialized production locations (Gereffi, 2009); India’s pioneering
workforce development strategies to train local engineers and information
technology specialists for global R&D hubs (Wadhwa et al., 2008); and
Brazil’s ‘industrial condominium’ and ‘modular consortium’ concepts for
automobile production that recruit GVC lead firms and their top suppliers
to set up coordinated manufacturing facilities in the same factory complex,
such as Volkswagen’s truck and bus chassis plant in Resende (Neto and
Pires, 2010).
III. ECONOMIC UPGRADING AND THE NEW
GEOGRAPHY OF GLOBAL PRODUCTION
AND TRADE
While governance issues have attracted a good deal of attention among
GVC scholars, the research on economic upgrading has been at least as
important because many of the people who use the GVC framework have
a very strong development focus. The GVC paradigm links scholarly re-
search on globalization with the concerns of international organizations,
policy makers and social activists who are trying to harness the potential
gains of globalization to the pragmatic goals of economic growth, includ-
ing more and better jobs and improved competitiveness for numerous
regions, countries and social groups that feel increasingly vulnerable in
the global economy. In both developed and developing countries, there is
growing concern that the economic gains of participating in global supply
chains do not necessarily translate into good jobs or stable employment
and, in the worst case, economic upgrading may be linked to a significant
deterioration of labor conditions and other forms of social downgrading.
A key research question is: Under what conditions can participation in
GVCs contribute to both economic and social upgrading in developing
countries? (Barrientos et al., 2011a, 2011b; Lee et al., 2011).
The emergence of GVCs has redefined how we conceptualize economic
development. For most early industrializers, including the US, Germany
and Japan, industrialization meant building relatively complete supply
chains at home. The core idea was that no nation could become globally
competitive without a broad and deep industrial base, and thus consid-
erable effort was dedicated to bring together the capital, technology and
labor needed to create new industries. The ISI model of development, as
previously noted, attempted to replicate the feat of these initial industri-
alizers by enlisting transnational corporations in producer-driven GVCs
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to build modern industries in relatively big developing countries, step by
step, working from final products back to key components and subassem-
blies (such as engines in cars) under the watchful eye of interventionist
developmental states.
The current era of export-oriented industrialization, which is sometimes
called ‘globalization’s 2
nd
unbundling’ (Baldwin, 2011), has opened up
a radically new development path. Today, nations seek to industrialize
by simply joining a supply chain to assemble final goods or make spe-
cialized inputs; they no longer try to build single-nation supply chains
from scratch. For Baldwin, globalization’s first unbundling was that rail-
roads and steamships made it feasible to spatially separate production
and consumption, and once the separation was feasible, scale economies
and comparative advantage made it inevitable. The second unbundling
was linked to the information and communication technology revolution,
which allowed production stages that were previously performed in close
proximity to be geographically dispersed in order to reduce production
costs. The spatial scale of the second unbundling is not fixed, however;
it could be regional or global, and thus the geographical configuration of
GVCs can and does change over time.
In short, while industrialization under the EOI model became easier and
faster (countries could just ‘join’ supply chains by performing specialized
tasks, rather than ‘build’ them), it may also be less meaningful. If coun-
tries are only engaged in the simplest forms of EOI, such as assembling
imported parts for overseas markets in export-processing zones, then they
would develop neither the institutions, nor the know-how, nor the con-
sumer markets needed to create and sustain entire industries. Indeed, for
many of the small and least developed countries in the global economy,
the gains associated with traditional forms of industrialization in terms
of high-income jobs, forward and backward linkages, and wealth creation
and innovation have been limited and uneven at best under the EOI model.
Furthermore, there is growing concern that the extensive global outsourc-
ing associated with globalization’s second unbundling may have alarming
implications for innovation and the i nternational competitiveness of even
the advanced industrial economies.
6
The challenge of economic upgrading in GVCs, therefore, is precisely
to identify the conditions under which developing as well as developed
countries and firms can ‘climb the value chain’ from basic assembly activ-
ities using low-cost and unskilled labor to more advanced forms of ‘full
package’ supply and integrated manufacturing. ‘Economic upgrading’ is
defined as the process by which economic actors firms and workers
move from low-value to relatively high-value activities in GVCs (Gereffi,
2005: 171). Within the GVC framework, four types of upgrading have been
identified (Humphrey and Schmitz, 2002):
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GEREFFI: GVCs IN A POST-WASHINGTON CONSENSUS WORLD
1. Product upgrading, or moving into more sophisticated product lines;
2. Process upgrading, which transforms inputs into outputs more effi-
ciently by reorganizing the production system or introducing superior
technology;
3. Functional upgrading, which entails acquiring new functions (or aban-
doning existing functions) to increase the overall skill content of the
activities; and
4. Chain upgrading, in which firms move into new but often related in-
dustries.
The ability or inability of countries and firms to upgrade in these var-
ious ways has been the focal point of numerous GVC studies, but novel
aspects related to the upgrading process have been introduced in the
post-Washington Consensus era. First, there has been growing interest
by the World Trade Organization (WTO), the Organisation for Economic
Co-operation and Development (OECD) and other international organi-
zations to establish new metrics of value-added trade that will clarify the
extent to which successful export-oriented economies use domestic or im-
ported inputs to fuel their growth. Second, in the wake of the 2008–09
global economic crisis, economic diversification through shifting end mar-
kets appears to be reconfiguring the growth opportunities for GVCs in
ways that may shift their orientation toward the domestic markets of large
emerging economies and toward more regionally oriented, rather than
global, supply chains. We will consider each topic below.
A new metric for GVC analysis: Value-added trade
In a world characterized by a predominance of GVCs, exports of final
products are increasingly composed of imports of intermediate inputs. As
supply chains go global, therefore, more intermediate goods are traded
across borders, and more parts and components are imported for use in
exports (Feenstra, 1998). In 2009, world exports of intermediate goods ex-
ceeded the combined export values of final and capital goods, representing
51 per cent of non-fuel merchandise exports (WTO and IDE-JETRO, 2011:
81). Governments and international organizations are taking notice of this
emerging pattern of global trade, which is called a shift from ‘trade i n
goods’ to ‘trade in value added,’ ‘trade in tasks’ and ‘trade in capabilities’
7
(OECD, 2011; WTO and IDE-JETRO, 2011).
Emerging economies have clearly improved their position in GVCs,
surging ahead of the advanced industrial countries in terms of export
performance. Between 1995 and 2007, the global export market shares of
the US and Japan fell by 3.8 and 3.7 percentage points, respectively, while
China more t han doubled its market share from 4 per cent in 1995 to 10.1
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per cent in 2007, making it the world export leader (ahead of Germany, the
US and Japan). South Korea, Mexico, Turkey, South Africa and the former
transition countries in central Europe also increased their export market
shares during this period (Beltramello et al., 2012: 9–10). Potentially more
impressive is the fact that emerging economies made their most significant
gains in high- and medium-technology industries, which were previously
the stronghold of OECD countries.
8
This phenomenon was mainly driven
by China, whose share of exports of goods in high-tech industries soared
by 13.5 percentage points during the period, 1995–2007, moving it ahead
of the US as the world’s largest exporter of high-tech products (Beltramello
et al., 2012: 10).
While most intermediate goods are still traded within large regional
economic blocks, such as the European Union, rather than across them
(OECD, 2011), Asia’s linkages to the European Union and North America
represented the two highest inter-regional import flows of intermediate
goods in 2008. Asia imported more intermediate goods than it exported,
indicating the region’s high level of integration within global supply chains
(WTO and IDE-JETRO, 2011: 83–5). The geographical concentration of sup-
ply chains is also obvious at the country level. In 2000–08, China accounted
for 67 per cent of the world’s processing exports,
9
followed by Mexico with
18 per cent (WTO and IDE-JETRO, 2011: 21).
China has benefited greatly from this form of participation in global sup-
ply chains. One-third of China’s imports are destined for export processing
zones, which account for almost half of the country’s exports (WTO and
IDE-JETRO, 2011: 21). China’s ‘supply chain cities’ are a perfect illustration
of how China is turning scale-driven specialization into a persistent com-
petitive advantage for the country. From foreign direct investment-driven
clusters in Guangdong to single-product clusters in Zhejiang, China’s sheer
size has allowed it to set up broad manufacturing clusters at the regional
level. These specialized clusters are linked, on the one hand, to East Asian
suppliers of key parts and components and, on the other hand, to global
buyers to bring Chinese products to the world market (Gereffi, 2009).
Paradoxically, China does not create or capture most of t he value gener-
ated through its value chain exports. In fact, as more types of intermediate
goods are traded within global supply chains, the discrepancy is growing
between where final goods are produced and exported and where value is
created and captured. For example, Apple’s iPhones are entirely assembled
in China by a Taiwanese contract manufacturer (Foxconn) and exported
to the US. When a traditional measure is used, which assigns the gross
export value of the product to the exporting country, the unit export value
of iPhones from China is $194.04. Of this, only $24.63 is imported con-
tent from the US, meaning that every iPhone imported into the US results
in a US balance of payments deficit of $169.41 (Figure 2). However, this
does not mean that China benefits from a trade surplus of $169.41 for each
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Figure 2 US bilateral trade balance with China for one unit of iPhone4 (US$).
Source: OECD (2011: 40).
iPhone it exports, since the value added in China is only $6.54 per phone.
The balance of China’s iPhone production costs is made up of imports
from Korea ($80.05), Germany ($16.08) and diverse other countries.
10
These advances in GVC metrics related to value creation and value cap-
ture are a propitious development for policy-oriented research (OECD,
2011; WTO and IDE-JETRO, 2011; UNCTAD, 2013). As showcased by the
iPhone study, existing trade statistics are unable to grasp the changing pat-
terns of global production and trade. This is an area where GVC analysis
and supply chain management research can be mutually beneficial.
11
So-
phisticated value chain data disaggregated by business functions can com-
plement existing country-level trade statistics and industry-level input-
output data, providing a clear picture of who is gaining and losing in
GVCs (Sturgeon and Gereffi, 2009). When combined with data on employ-
ment, they will greatly advance our understanding of both economic and
social development opportunities in the global economy.
Shifting end markets and the regionalization of GVCs
As world trade bounces back from the 2008–09 economic crises, emerging
economies are becoming a main engine of world economic recovery. Tepid
growth in the global North since the mid-1980s was slowed even further
by the latest crisis, whereas demand is quickly growing in the global
South, particularly in large emerging economies such as China, India and
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Brazil (Staritz et al., 2011). Over the period, 2005–10, the merchandise
imports of the European Union and the US increased by 27 per cent and
14 per cent, respectively, while emerging economies expanded their mer-
chandise imports much faster: Brazil (147 per cent), India (129 per cent),
China (111 per cent) and South Africa (51 per cent). In 2010, 52 per cent
of Asia’s manufactured exports were destined for developing countries
(WTO, 2011), indicating shifting end markets in the global economy.
The dramatic decline of world merchandise trade as a result of the
economic crisis of 2008–09 has been described as ‘the great trade collapse’
(Baldwin, 2009). After more than six years of positive trade growth, all
OECD countries registered a decline in exports and imports exceeding
10 per cent between 2008 and 2009, reaching a record negative growth of
-37 per cent in April 2009 (Beltramello et al., 2012: 27). The trade collapse
was much larger in intermediates than in final consumption goods, which
underscores the existence of a ‘bullwhip’ effect in GVCs namely, lower
demand for final consumption goods (downstream) is amplified in more
dramatic demand reductions for intermediates that are upstream in the
value chain (Altomonte et al., 2012).
The ‘great trade collapse’ accelerated the shift in end markets from the
North to the South in GVCs (Kaplinsky and Farooki, 2011) and it also
encouraged lead firms from developing countries to regionalize their
supply chains. In sub-Saharan Africa, for instance, the recent entry of
South African clothing manufacturers in neighboring countries such as
Lesotho and Swaziland has led to the rise of regional value chains driven
by South African retailers. Compared to the US buyer-driven chain, these
regional chains focus on shorter production runs and quick response with
higher fashion content, and are based on direct relationships to large South
African clothing retailers (Morris et al., 2011). Similarly, South African
supermarkets are expanding via regional supply chains and spearheading
the rise of supermarkets across sub-Saharan Africa (Weatherspoon and
Reardon, 2003).
The GVC literature shows that value chains oriented to different end
markets often entail distinct upgrading opportunities (Palpacuer et al.,
2005; Gibbon, 2008). For example, the demand in lower-income countries
for less sophisticated products with regard to quality and variety can have
major upgrading implications (Kaplinsky et al., 2011). On the one hand,
lower entry barriers and less stringent product and process standards in
emerging markets can facilitate the participation of developing country
firms in global supply chains. They can engage in higher value-added ac-
tivities, such as product development and design, which they would have
little chance to do in the global chains. With more intimate knowledge of
local and regional markets vis-
`
a-vis multinational firms, they can gener-
ate ‘frugal’ innovations that are suitable to resource-poor environments
(Clark et al., 2009). On the other hand, solely focusing on low-income
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markets could lock suppliers into slimmer margins and cutthroat com-
petition. Their knowledge advantage in local markets often evaporates
quickly when multinational firms catch up in learning the markets, as
found in the Chinese mobile phone industry (Brandt and Thun, 2011).
IV. THE IMPACT OF GVC ANALYSIS ON THE
DEVELOPMENT AGENDAS OF INTERNATIONAL
DONORS
GVC studies are pervasive in academic publications that examine a wide
range of global industries,
12
and the framework has been adopted by
many of the major international donors and peak organizations concerned
with economic development, including the World Bank (Webber and
Labaste, 2009; Cattaneo et al., 2010), the WTO (WTO and IDE-JETRO,
2011), the OECD (OECD, 2011; Beltramello et al., 2012), the International
Labour Organization (ILO) (Gereffi, 2006), the US Agency for International
Development (USAID, 2012), the US International Trade Commission
(USITC, 2011), the World Economic Forum (2012), and the UN Conference
on Trade and Development (UNCTAD, 2013).
The international institutions that have provided the underpinning for
the Washington Consensus, such as the World Bank, the IMF and the WTO,
along with major bilateral donors, such as USAID and the UK’s Depart-
ment for International Development (DFID),
13
have embraced new hetero-
dox models of development thinking, with an emphasis on sectoral analy-
sis that allows macro issues such as international trade and investment to
be linked more closely with the micro development issues of employment,
gender dynamics and sustainable livelihoods (M4P, 2008). In addition, new
alliances have emerged among diverse UN and other international agen-
cies (such as the World Bank and the ILO) to promote joint research agendas
that explore the links between economic and social upgrading, explicitly
using the GVC framework (Cattaneo et al., 2010; Barrientos et al., 2011a).
Unlike most social science theories and paradigms, which have only a
limited impact on specific international organizations and development
policy settings, the GVC framework is unusual in that it has diffused
very rapidly during the past decade and been adopted by a wide range
of economic, social and cultural organizations, as well as action-oriented
non-governmental organizations (NGOs) in the labor and environmental
arenas. Table 1 identifies some of these international donor organizations
and recent projects or studies that are informed by the GVC approach.
While this topic merits a far more detailed discussion, two aspects of the
use of GVC analysis in these organizations will be touched on below. First,
what are the similarities and differences in how GVC analysis is used in
these organizations? For example, most of these international donors have
development programs that emphasize pro-poor growth, the protection of
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Table 1 Use of Global Value Chain Analysis in Selected International Organizations
2012
Illustrative GVC
Organization Publications Content Description GVC LED Clusters PSD TVET Poverty Micro
World Bank Cattaneo et al. (2010). This book uses a GVC perspective to
analyze the impact of the global financial
crisis of 2008-09 on global trade,
production and demand in several
sectors. Particular attention is paid to
opportunities for developing countries to
enter into GVCs post-crisis.
xxxxx
IDB Flores and Vaillant
(2011).
This paper compares the upgrading
performance of Latin American countries
in terms of export sophistication in a
variety of industries.
xx x x x x
DFID Capturing the Gains
(2012).
This three-year research project brings
together an international network of
expertstogaininformationonthe
employment and wellbeing of workers
and small producers in GVCs.
xxxx
USAID Value Chain
Development Wiki
(2012).
This website gathers information from
various projects and draws on research
conducted under USAID’s
Microenterprise Development Team to
codify good practice in value chain
development, with an eye to linking
SMEs into global, national and local
value chains.
xxxxx
GTZ/GIZ Will (2011). This manual considers information from
GTZ-funded pilot projects in developing
countries in order to draw lessons about
the various processes by which
smallholders can receive GLOBALGAP
certification, which is required by many
European food retailers.
xx xx x
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WTO WTO (2011). This publication uses a GVC framework to
consider changing trade patterns in East
Asia. It proposes a new trade statistic -
trade in value added - to complement
traditional trade statistics.
x
OECD OECD (2011). This report to the OECD Working Party on
Globalization of Industry and the
Committee on Innovation, Industry and
Entrepreneurship uses the GVC
framework to provide policy advice to
OECD countries with a focus on
maintaining competitiveness and
identifying new sources of growth.
xxx
ILO Herr and Muzira
(2009).
This guide for development practitioners,
governments and private actors outlines
strategies for upgrading within value
chains while maintaining or improving
labor standards for workers.
xx x x
Notes:
GVC: The Global Value Chain framework focuses on the placement of firms and localities within the global organization of trade and production
within particular sectors or industries.
LED: The Local Economic Development framework focuses on initiatives geared towards the local or sub-national public sector as an enabler or
instigator of economic development.
Clusters: The Cluster framework focuses on initiatives geared towards the local or sub-national private sector.
PSD: Private Sector Development strategies focus on the concept of “making markets work.”
TVET: Technical and Vocational Education and Training strategies focus on improving the quality and quantity of workers’ marketable skills through
vocational training initiatives.
Poverty: Poverty Alleviation programs are those that seek the reduction, alleviation or eradication of poverty.
Micro: Microfinance programs make very small “microloans” to entrepreneurs or households that are otherwise unable to access financial markets
under favorable terms.
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small and medium enterprises and local stakeholders, and a private sector-
oriented, market-led model. However, they differ in other respects, such
as the weight given to economic growth in relation to poverty reduction
as well as geographic regions and sectors of particular interest. Second,
what are the other development models or frameworks that are being
used in each organization and to what degree are these complementary
or antagonistic with the GVC approach? One of the key reasons for the
turn to GVC and GPN approaches may be that their emphasis on global
industries offers a meso-level, sectoral and actor-oriented approach to the
global economy, which provides multi-scalar options to link global and
local levels of analysis, in contrast to macro models, which focus on general
economic trends and broad policy prescriptions, or the micro and localized
approach of clusters, which aren’t connected to the broader structures at
the national, regional or global levels.
Value chain analysis is used widely today as an instrument of private
sector development by virtually all major bilateral and multilateral donor
agencies. Altenburg (2007) highlights two main reasons for the increasing
popularity of the GVC approach within the international donor commu-
nity since the end of the 1990s: first, the accumulating evidence of a link
between economic growth driven by the private sector and poverty reduc-
tion; and second, the fact that global integration of trade and production
through GVCs transmits the pressures of global competition to domestic
markets in developing economies, leaving less space for local firms to de-
sign, produce and market on their own. As Altenburg (2007: 04) puts it,
‘The question is thus not if ,buthow to integrate in value chains in a way
that allows for incorporation of a growing number of the workforce and
increasing levels of productivity and outcomes. This calls for a balanced ap-
proach which takes both competitiveness and equity issues into account.’
There is no simple way to connect GVC analysis to private sector devel-
opment, since the firms in a value chain range from transnational corpo-
rations to microenterprises, and the institutional context and geographic
scope of value chains vary enormously. In order to provide some guid-
ance for interventions by donors, Humphrey and Navas-Alem
´
an (2010)
distinguish four different objectives of donor interventions: strengthen-
ing the weakest link to address potential bottlenecks; improving flows of
knowledge and resources to make all firms in the chain more productive;
working on specific links between firms to improve efficiency; and creating
new or alternate links in the chain to promote diversified outcomes.
An alternative to this bottom-up approach to value chain development
is targeting lead firms rather than local suppliers i.e., working with
the strongest link in the chain, rather than the weakest. This lead-firm-
centered, top-down GVC approach has been used effectively for very
different purposes, whether it be the World Bank’s revitalized ‘Aid for
Trade’ initiative, which sees the private sector as the engine that powers
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global trade and urges GVC lead firms to play a greater role in build-
ing trade capacity in developing countries (World Bank, 2011), or the
confrontational stance of NGOs such as Oxfam (2004), which mobilizes
international campaigns against lead firms to improve the conditions of
women workers in global supply chains.
The reality is that most bilateral and multilateral donors use GVC anal-
ysis in combination with other diagnostic tools they have tried in the
past (Table 1) to address a variety of broad development goals, includ-
ing poverty reduction, economic growth, employment creation and in-
come generation, enterprise development, and environmental stability
and cleaner production (UNIDO, 2011). One of the most comprehensive re-
views of the approaches of seven UN agencies to value chain development
concludes, however, that there is considerable ‘fuzziness’ about how the
concept is adopted: . . . [value chain]-related activities sometimes seem to
be rather the outcome of “re-labelling” former private sector development
interventions. In other cases, activities that could clearly be subsumed
under the value chain approach are not labeled accordingly . . . . These
observed shortcomings in knowledge management, transparency and the
lack of defined unique selling positions make inter-agency cooperation in
[value chain] promotion difficult’ (Stamm and von Drachenfels, 2011: 30).
In short, much of the literature that uses the GVC moniker misses the point
and doesn’t apply the framework consistently.
The widespread adoption of the GVC framework by international
donors during the past decade represents a remarkable convergence
around a single paradigm, notwithstanding the differing emphases across
UN and bilateral agencies. Skeptics might argue that the neoliberal fun-
damentals of the Washington Consensus model of development remain
entrenched in many of these organizations (Neilsen, 2013), even if GVC
analysis is rooted in assumptions that are highly critical of the neoliberal
paradigm (see Gereffi and Korzeniewicz, 1994; Kaplinsky, 2005; Bair, 2009;
Hamilton and Gereffi, 2009; Sturgeon, 2009; Lee, 2010). The counterargu-
ment made throughout this article is that the GVC perspective highlights
the power dynamics in global industries, embodied i n the role of lead
firms and the institutions that underpin the global economic order, and
this introduces broader and more heterodox views of development that
challenge the mainstream.
During the past decade, the global economy has seen a transfer of pro-
duction, technological capabilities, growth potential, consumption and po-
litical clout from the North to the South. One of the major reasons for the
popularity of the GVC framework is that it allows us to analyze many of
these shifts with greater precision than prior paradigms. While interpreta-
tions of t he direction and impact of these trends will vary, the contributions
of GVC analysis should not be discounted because the donor organizations
have multiple and sometimes discordant agendas. Furthermore, as more
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international organizations employ the GVC paradigm, its methodological
rigor and policy relevance are likely to increase.
V. CONCLUSIONS
What will replace the globalization model? This is the question posed in
a recent newspaper article, which contends: ‘The globalization model of
the past 30 years is cracking up. And there appears to be no new model
to replace it’ (Smick, 2012). While we concur that globalization as we
know it is undergoing a series of fundamental shifts, many elements of the
future system are there for us to see. The international competitiveness of
advanced industrial economies has gradually been eroded, at least in terms
of traditional measures of export performance. Emerging economies now
play a more prominent role in international trade, and they have expanded
their export market shares of high technology and medium technology
products, with China playing a particularly prominent role (Beltramello
et al., 2012). The emergence of GVCs cautions against an overreliance on
simple export measures of competitiveness, however, and this paper has
sought to unpack various insights from the GVC perspective to better
understand some of the new features of the post-Washington Consensus
global economy.
The Washington Consensus model of development, which held sway
from the mid-1980s through the mid-2000s, is a nation-state-centered view
of the global economy, in which countries are the primary units of anal-
ysis in international production and trade. The main topics of debate in-
volved the extent to which economic policies were ‘market-friendly’ or
overly interventionist (World Bank, 1993), and the nature of the stabiliza-
tion programs and market access agreements that would be imposed on
recalcitrant developing economies by the IMF, the World Bank and other
international financial and trade institutions to bring them in line with the
dominant model.
The GVC framework fundamentally challenges this view of the global
economy and it provides a different interpretation of the key drivers
of change over the past four decades. The sector-based approach of
the G VC perspective is premised on the structural diversity of global
industries, which are major entry points for developing nations in the
global economy. The major analytical categories used to examine global
value chains include:
1. The role of lead firms in setting performance requirements and standards
that condition entry and mobility within GVCs;
2. The evolving nature of production and trade networks that link large and
small suppliers to the global economy as well as to domestic economies;
3. Trajectories of social and economic upgrading and downgrading,and
patterns of access and exclusion, which help describe the connections
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between the development of firms and countries within the interna-
tional system;
4. Multiple governance structures (international and domestic, public and
private, chain-based and civic) that link different components of the
system together;
5. The shift from trade in goods to trade in value added, tasks and business
functions in looking at key economic activities related to upgrading and
competitiveness; and
6. Interventions and pressure points that allow for change in this system.
Economic globalization is a byproduct of international production and
trade networks organized by transnational firms and it is embedded in
various kinds of regulation, including rules of the game established by
international institutions, national government policies, and varied forms
of private governance used by non-state actors to manage activities in
GVCs (Mayer and Gereffi, 2010). One potential outcome of the current
situation is that public governance will be called upon to play a stronger
role in supplementing and reinforcing corporate codes of conduct, product
certifications, process standards and other voluntary, non-governmental
types of private governance that have proliferated in the last two decades,
and that multi-stakeholder initiatives involving both public and private
actors will arise to deal with collective action problems.
While the contours of a new international economic order are still in flux,
several features are already having an impact on development agendas.
The most dynamic growth poles in the global economy are constituted
by an expanding number of rising powers that combine relatively large
domestic markets, skilled workforces, capable producers and a push to-
ward indigenous innovation. These include the original BRIC countries
as well as South Korea, Mexico, Turkey and Indonesia, among others
(O’Neill, 2011). As the EOI development strategy is replaced by more
inward-looking approaches focusing on domestic and regional markets,
industrial policy in the leading economies of the South is likely to become
more significant. While policy priorities at the macro level of the global
economy seek new ways to channel trade and investment patterns toward
more robust employment outcomes (OECD, 2012), the challenge will be
to link economic upgrading and social upgrading in terms of both ma-
terial conditions of work and the quantity and quality of jobs created in
contemporary GVCs (Barrientos et al., 2011a, 2011b).
ACKNOWLEDGEMENTS
The author would like to thank Andrew Guinn, Rebecca Schultz and Jackie
Xu for their research assistance on this paper.
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NOTES
1 For recent reviews of GCC and GVC literature, see Bair (2009), Lee (2010), and
Geref and Lee (2012).
2 In the original 1994 article that introduced the concepts of producer-driven and
buyer-driven GCCs, there is a section on ‘The Role of State Policies in Global
Commodity Chains,’ which makes the link between GCCs and development
strategies very clear: ‘An important affinity exists between the ISI and EOI
strategies of national development and the structure of commodity chains. Im-
port substitution occurs in the same kinds of capital- and technology-intensive
industries represented by producer-driven commodity chains . . . In addi-
tion, the main economic agents in both cases are [transnational corporations]
and state-owned enterprises. Export-oriented industrialization, on the other
hand, is channeled through buyer-driven commodity chains where produc-
tion in labor-intensive industries is concentrated in small to medium-sized
private domestic firms located mainly in the Third World. Historically, the
export-oriented development strategy of the East Asian [newly industrializing
countries] and buyer-driven commodity chains emerged together in the early
1970s, suggesting a close connection between the success of EOI and the devel-
opment of new forms of organizational integration in buyer-driven industrial
networks’ (Gereffi, 1994: 100).
3 Knowing if the lead firm in a chain is a buyer or a producer can help to
determine the most likely upgrading opportunities for suppliers. For exam-
ple, buyer-driven chains tend to provide more opportunities to their suppli-
ers in product and functional upgrading because the core competence of the
buyers is in marketing and branding, not production, whereas lead firms in
producer-driven chains often require varied forms of process upgrading and
international certifications among their suppliers due to strict quality and per-
formance standards that affect the entire chain.
4 Jim O’Neill (2011), the Goldman Sachs executive who coined the catchy
acronym BRIC in 2001 to refer to Brazil, Russia, India and China, now ar-
gues that there is a much larger number of ‘growth economies’ (BRICs plus
11) that fall into this category. These include the MIST nations (Mexico, In-
donesia, South Korea and Turkey), and other periodic high-performers such as
Bangladesh, Egypt, Pakistan, the Philippines, and Vietnam (Martin, 2012). The
original BRIC classification was extended to BRICS with the addition of South
Africa in 2010. For purposes of this paper, the origin of these acronyms is less
important than the collective effect of this set of so-called emerging economies,
which are reshaping both supply and demand in many GVCs.
5 Li & Fung, the largest trading company in the world, has around 30,000 sup-
pliers globally and operates in 40 countries (Fung, 2011).
6 Pisano and Shih (2009), for example, argue that the US is in danger of losing its
‘industrial commons,’ which includes not just suppliers of advanced materials,
production equipment and components, but also R&D know-how, engineering
and processing skills, and a wide range of other manufacturing competencies.
Because manufacturing is closely tied to the capacity for innovation, offshore
manufacturing can undermine the capabilities of the US economy to remain
competitive in existing high-tech industries, which often depend in critical
ways on the industrial commons of mature sectors, and also impede its ability
to move into new industries. This helps explain why Apple does not manu-
facture its iPhone in the US. While labor costs are obviously much lower and
a certain class of skilled workers more abundant in China, where all US-sold
iPhones are assembled, perhaps the biggest limitation is that the vast majority
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of suppliers needed to make the hundreds of parts that go into every iPhone
are located in East Asia, and not North America. This could hinder the ability
of US companies to remain innovative (see Duhigg and Bradsher, 2012; Shih,
2009; Pisano and Shih, 2012).
7 There are conceptual difficulties, however, in using individual tasks or capa-
bilities as a unit of analysis in determining how easy it is to fragment and
relocate work in GVCs. It is more likely that larger sets of activities associated
with ‘business functions’ will be outsourced, rather than individual jobs and
capabilities (Sturgeon and Gereffi, 2009).
8 Since these figures refer to gross exports, we need more detailed information
about the degree of domestic or foreign value added to assess the extent to
which these numbers reflect the local assembly of high tech imports or signif-
icant national technology content.
9 Processing exports refer to exports that use duty-free imports for subsequent
processing and re-exports.
10 This is not an uncommon pattern in China. Domestic content accounts for only
about half of China’s manufacturing exports and it is even smaller (18 per cent)
in its processing exports, mostly done by foreign-owned firms (Koopman et al.,
2008).
11 Note that the iPhone study and other similar studies (e.g., Linden et al., 2009;
Dedrick et al., 2010) are based on tear-down analysis generated by supply chain
management consultancies such as iSuppli.
12 Around 680 publications and 570 authors were listed on the Global Value
Chains website (http://www.globalvaluechains.org) as of 20 February 2013.
13 DFID changed the name of its bilateral economic aid program to the UK Agency
for International Development (UKaid) in 2012.
NOTES ON CONTRIBUTOR
Gary Gereffi is Professor of Sociology and Director of the Center on Globalization,
Governance & Competitiveness at Duke University. He has published numerous
books and articles on globalization, global value chains, and economic and social
upgrading in various parts of the world, including: The New Offshoring of Jobs
and Global Development (International Institute of Labour Studies, 2006); Global
Value Chains in a Postcrisis World: A Development Perspective (co-edited with Olivier
Cattaneo and Cornelia Staritz) (The World Bank, 2010); and Shifting End Markets
and Upgrading Prospects in Global Value Chains (co-edited with Staritz and Cattaneo)
(special issue of Int. J. of Technological Learning, Innovation and Development, 2011).
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... The machinery value chains in Brazil involve approximately 8000 companies (ABIMAQ, 2020) participating in complicated productive networks for a wide range of products. Considering that it would be impossible to depict those networks on a map and that our research's final goal is to support normative action regarding upgrading, especially resilience strategies in the short and long term, the global value chain (GVC) framework (De Marchi, Di Maria, Golini, & Perri, 2020;Gereffi, 2014) and the smiling curve (Shih, 1996;OECD & WTO, 2013) were adopted as main references for our case study. ...
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... These locations result from the governance of chains' activities, from less to more vertically integrated and global (Gereffi, Humphrey, & Sturgeon, 2005). Upgrading, then, is the socio-economic improvement of the activities and tasks performed by people in companies and in countries, shifting from low-value to relatively high-value activities (Barrientos, Gereffi, & Rossi, 2011;Gereffi, 2014). Upgrading possibilities are related to governance schemes that configure different insertions into GVC (Giuliani, Pietrobelli, & Rabellotti, 2005), orbiting around powerful multinational firms that lead most innovations and adopt different strategies for knowledge transfer to subsidiaries in developing countries. ...
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... Such structural and political transformations had a strong impact on the geography of the global economy. Intricate global value chains (GVCs) emerged in which the final value of the commodity is the outcome of working processes performed in several regions of the world (Gereffi and Korzeniewicz 1994;Bair 2005;Gereffi 2014; World Bank 2020; Bair et alt. 2021). ...
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... Further, some researchers suggest that MWFs might have a limited impact on the technological upgrading of local firms due to weak governance structures, less demanding nature of regulations and lack of leadership in value chains. The absence of leadership in value chains could be less conducive to knowledge and technology transfers than stable collaborations between a powerful lead firm and its suppliers (Alcacer and Oxley, 2014;Gereffi, 2014). For example, Tessmann (2018) shows that third-party intermediaries do not contribute to better development outcomes in an uncoordinated governance context in his empirical work on the Ivorian cashew value chain. ...
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Global value chain/global production network studies have extensively documented the role of lead firms from the Global North in economic development in the Global South, including as 'manufacturers without factories' (MWFs). However, the role of local firms in sourcing from suppliers has been overlooked. In this article, we report the findings of a qualitative study and demonstrate that the local MWFs helped establish India as the leading supplier of pharmaceuticals worldwide and in the Global South. We show how the different types of local MWFs ('propagandists', 'pioneers', 'connectors' and 'adaptors') impact the strategic coupling, industrial upgrading and governance in South-South value chains and contribute to regional economic development.
... International production, trade, and investments are increasingly organised within GVCs where the different production processes are located across different countries. The concept of GVC helps in setting a framework to understand how international supply chains link economic activities at the global, regional, national, and local levels within particular industries (Agrawal & Smith, 2015;Gereffi, 2014;Gereffi, 2018;WB, 2020). Modern internationalisation efforts have been based on the interrelation between three distinguished factors: (1) firms of all sizes striving for further growth expanding their markets results in increased geographical reach beyond the home market, (2) firms' efforts to overcome the liabilities of 'foreignness' and 'outsidership' in crossing borders and (3) the firms' age, timing and rate of growth and internationalisation (Etemad, 2013). ...
... Si suponemos que la materia prima y medios de producción están dados para una empresa de cualquier sector productivo o de servicios, al igual que el mercado y los precios finales, la forma de aumentar su ganancia se reduce a dos alternativas: aumentar el volumen de producción en el mismo tiempo (productividad del trabajo), o reducir los tiempos muertos entre las fases parciales de los procesos (ritmo de circulación del capital). Las cadenas de montaje son un ejemplo de ambos; los estudios de las cadenas globales de producción muestran la lucha de las diferentes empresas dentro de la cadena por apropiarse del control y de la parte estratégica y relativamente mayor del valor final producido (Foladori 2018;Gereffi 2014). ...
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