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Purpose – The purpose of this paper is to introduce the global value chain (GVC) approach to understand the relationship between multinational enterprises (MNEs) and the changing patterns of global trade, investment and production, and its impact on economic and social upgrading. It aims to illuminate how GVCs can advance our understanding about MNEs and rising power (RP) firms and their impact on economic and social upgrading in fragmented and dispersed global production systems. Design/methodology/approach – The paper reviews the GVC literature focusing on two conceptual elements of the GVC approach, governance and upgrading, and highlights three key recent developments in GVCs: concentration, regionalization and synergistic governance. Findings – The paper underscores the complicated role of GVCs in shaping economic and social upgrading for emerging economies, RP firms and developing country firms in general. Rising geographic and organizational concentration in GVCs leads to the uneven distribution of upgrading opportunities in favor of RP firms, and yet economic upgrading may be elusive even for the most established suppliers because of power asymmetry with global buyers. Shifting end markets and the regionalization of value chains can benefit RP firms by presenting alternative markets for upgrading. Yet, without further upgrading, such benefits may be achieved at the expense of social downgrading. Finally, the ineffectiveness of private standards to achieve social upgrading has led to calls for synergistic governance through the cooperation of private, public and social actors, both global and local. Originality/value – The paper illuminates how the GVC approach and its key concepts can contribute to the critical international business and RP firms literature by examining the latest dynamics in GVCs and their impacts on economic and social development in developing countries.
Global value chains, rising power
rms and economic and
social upgrading
Joonkoo Lee
School of Business, Hanyang University, Seoul, South Korea, and
Gary Geref
Department of Sociology, Duke University, Durham, North Carolina, USA
Purpose The purpose of this paper is to introduce the global value chain (GVC) approach to
understand the relationship between multinational enterprises (MNEs) and the changing patterns of
global trade, investment and production, and its impact on economic and social upgrading. It aims to
illuminate how GVCs can advance our understanding about MNEs and rising power (RP) rms and
their impact on economic and social upgrading in fragmented and dispersed global production systems.
Design/methodology/approach The paper reviews the GVC literature focusing on two conceptual
elements of the GVC approach, governance and upgrading, and highlights three key recent
developments in GVCs: concentration, regionalization and synergistic governance.
Findings The paper underscores the complicated role of GVCs in shaping economic and social
upgrading for emerging economies, RP rms and developing country rms in general. Rising
geographic and organizational concentration in GVCs leads to the uneven distribution of upgrading
opportunities in favor of RP rms, and yet economic upgrading may be elusive even for the most
established suppliers because of power asymmetry with global buyers. Shifting end markets and the
regionalization of value chains can benet RP rms by presenting alternative markets for upgrading.
Yet, without further upgrading, such benets may be achieved at the expense of social downgrading.
Finally, the ineffectiveness of private standards to achieve social upgrading has led to calls for
synergistic governance through the cooperation of private, public and social actors, both global and
Originality/value The paper illuminates how the GVC approach and its key concepts can
contribute to the critical international business and RP rms literature by examining the latest
dynamics in GVCs and their impacts on economic and social development in developing countries.
Keywords Standards, Development, Lead rms, Regionalization, Concentration, Globalization,
Multinational enterprises, Economic and social upgrading, Global value chain, Rising powers
Paper type Viewpoint
With the growing inuence of multinational enterprises (MNEs) in the global economy,
their role in promoting economic growth in developing countries has been hotly debated.
In the international business (IB) literature, the mainstream approach tends to assume
the positive impact of MNEs on economic development. The general consensus is that
foreign direct investment and the presence of MNEs will lead to economic development
in the host country through the spillover of capital, technology, skills and knowledge
The current issue and full text archive of this journal is available on Emerald Insight at:
Global value
chains, rising
power rms
Received 12 March 2014
Revised 18 June 2014
Accepted 24 June 2014
critical perspectives on
international business
Vol. 11 No. 3/4, 2015
pp. 319-339
© Emerald Group Publishing Limited
DOI 10.1108/cpoib-03-2014-0018
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(Ghauri and Yamin, 2009;Meyer, 2004). Economic development is considered as a
byproduct of MNE operations, not a core objective of MNEs.
However, there has been weak evidence to support the spillover argument (Farole
and Winkler, 2014;Oetzel and Doh, 2009). This has led recent IB scholarship to challenge
such arguments, shifting attention to a more realistic picture of the effects of MNEs on
economic and social development. This critical perspective casts light on the potential
damaging effects of MNEs on economic development through the “race to the bottom”
and “immiserizing growth”. At the same time, with positive development outcomes no
longer guaranteed as a byproduct of MNE operations, this critical perspective questions
why MNEs should be concerned about development in the host country and the
potential constraints they may face in trying to achieve it (Gifford et al., 2010;Meyer,
2004;Yamin and Sinkovics, 2009).
Despite this renewed interest from a critical perspective, the IB literature has yet to
develop a systematic understanding of the relationship between MNEs and developing
economies (Ghauri and Yamin, 2009). A more robust conceptual framework is needed,
particularly because of the rapid reorganization of industrial production on the global
scale, as well as the varied ways in which the MNE orchestrates its value chains across
countries and regions, and inside and outside its organizational boundaries (Buckley,
2009;De Marchi et al., 2014). This controversy has been accentuated by the recent global
economic recession (Cattaneo et al., 2010;Geref, 2014). This reopens the question of
how these changes in the global and organizational environment of MNEs (re)shape the
possibilities and constraints of economic and social development in developing
countries (Buckley and Ghauri, 2004).
As a contribution to this framework-building effort, this article introduces the global
value chain (GVC) approach to better understand the relationship between MNEs and
the changing patterns of global trade, investment and production, as well as the impact
of MNEs on local upgrading efforts in developing economies. The GVC literature is
uniquely positioned to provide a bridge between the IB and development literatures.
The GVC approach originated with issues like why some countries are more successful
in achieving economic development than others, and these questions have recently
expanded into the social impact of economic upgrading (Barrientos et al., 2011;Geref
and Kaplinsky, 2001;Geref and Korzeniewicz, 1994;Lee et al., 2011). Unlike other
streams of development studies, however, the primary focus of GVC analysis is on rms
and the governance of inter-rm relations, thereby providing an entry point for
investigating networked forms of MNEs and other IB concerns (Bair, 2005;Lee, 2010 for
This article will show how rms that are organized in GVCs affect economic and
social upgrading in both dispersed and concentrated production systems, and it will also
identify new trends in the GVC system that should be more fully incorporated in the
critical IB literature. First, we introduce the GVC approach by highlighting two key
concepts – governance and upgrading – that are the building blocks of this framework.
Second, we discuss the implications for emerging economies and rising power (RP) rms
of three signicant developments in post-crisis GVCs: geographic and organizational
concentration, shifting end markets and regionalization and the rise of standards and
synergistic governance. We conclude with some summary reections on how the GVC
approach adds value to the IB literature.
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Governance and upgrading: complementary perspectives on the global
A GVC refers to “the full range of activities that rms and workers perform to bring a
specic product from its conception to its end use and beyond” (Geref and
Fernandez-Stark, 2011). Generally, it includes research and development (R&D), design,
production, sales and marketing, consumption and recycling. A GVC approach views
the global economy as a complex network linking together suppliers and buyers that are
integrated and driven by MNEs as lead rms. GVCs have become an integral part of the
global economy, reshaping the traditional patterns of international production and
trade. According to UNCTAD (2013, pp. 133-135), 80 per cent of world trade now passes
through GVCs, and the developing country share in global value-added trade doubled
from 20 to 40 per cent between 1990 and 2010. While measuring employment creation by
GVCs is difcult, one study of 39 countries estimates that GVCs have generated 88
million jobs (Jiang and Milberg, 2013).
The GVC approach provides a holistic view of global industries from the vantage
point of two key concepts: governance and upgrading. Governance highlights the
top-down process whereby lead rms integrate geographically and organizationally
dispersed economic activities. While GVC analysis shares a rm-centric approach with
the IB literature, its focus goes beyond the hierarchical governance of a rm (i.e. vertical
integration and headquarter–subunit relations), and extends to various forms of
contractual and relational coordination between independent companies that span
international borders (De Marchi et al., 2014). In addition to these corporate forms of
governance, the GVC approach also pays attention to public and social governance and
the institutional factors that shape them (Geref et al., 2005;Mayer, 2014).
The concept of upgrading focuses on the bottom-up strategies used by countries,
regions and local rms to maintain or improve their positions and outcomes in the global
economy. The GVC approach does not simply assume that integration to GVCs leads to
economic upgrading through positive spillovers, but seeks to establish under what
conditions, particularly under what GVC governance arrangements, upgrading (or
downgrading) is likely to occur (Barrientos et al., 2011;Humphrey and Schmitz, 2002)[1].
GVC governance: driving, coordinating and normalizing
GVC governance is dened as “authority and power relationships that determine how
nancial, material, and human resources are allocated and ow within a chain” (Geref,
1994, p. 97). Production processes in the globalization era have been fundamentally
restructured through offshoring and outsourcing. Unlike vertical integration where
internal control and corporate at are used to solve coordination problems within the
boundary of a rm, global outsourcing involves governance mechanisms that span the
activities of multiple rms across national boundaries.
The GVC literature highlights three aspects of GVC governance: driving,
coordinating and normalizing (Ponte and Sturgeon, 2014). “Governance as driving”
focuses on the lead rms in diverse global industries whose market power and
technological or marketing assets allow them to set the performance criteria in terms of
price, quality and delivery standards that shape the behavior of their suppliers. The
distinction between “producer-driven” and “buyer-driven” chains is seminal: it asserts
that two types of lead rms – large manufacturers and global buyers (i.e. retailers,
brands and supermarkets) – drive supply chains differently and pose distinct challenges
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for chain entry and upgrading (Geref, 1994;Geref and Lee, 2012). For example, while
in buyer-driven chains, global buyers like Nike tend to own few or no factories and
instead focus on product design, branding and marketing, their governance power
extends well beyond their main contractors as their orders and specications travel
down to hundreds of lower-tier suppliers in their supply chain[2](Donaghu and Barff,
“Governance as coordination” highlights the varied forms of inter-rm linkages in
GVCs. GVCs consist of multiple linkages that connect suppliers and buyers. The GVC
approach extends the “market–hierarchy” dichotomy in transaction cost economics
(Williamson, 1985) by offering a more elaborate typology of enduring inter-rm
networks that characterize international supply chains. For example, Geref et al. (2005)
identify ve types of GVC governance: market (arms-length transactions) and hierarchy
(vertical integration), along with three distinctive network-types (modular, relational
and captive). The GVC perspective asserts that not all network forms of governance are
alike. Also, it posits that the type of GVC governance that arises in a specic chain
depends on a combination of three key factors: the complexity of inter-rm transactions,
the codiability of the transactions and suppliers’ capability to meet buyers’
requirements. Thus, the nature of transactions denes the form of governance that
affects upgrading of the parties involved.
While “governance as driving” relates to the entire chain (macro-level) and
“governance as coordination” involves linkages at specic junctures in the chain
(micro-level), “governance as normalizing” deals with the meso-level of GVC
governance. Particularly, GVC scholars pay attention to various standards and relevant
normative frameworks that shape the overall conditions of GVC participation and
upgrading (Gibbon and Ponte, 2008;Ponte and Gibbon, 2005). Such standards allow a
normative, or commonly agreed, element of coordination, such as dening rules,
conventions and conditions of chain participation, to travel along the chain from one
node to another, working as a mechanism “re-aligning a given practice to be compatible
with a standard or norm” (Ponte and Sturgeon, 2014, p. 206).
Recent GVC research has highlighted the interaction of multiple forms of
governance. Challenging the existing notion of a unipolar structure of governance,
where one set of rms – buyers or producers – has dominant power to govern, newer
studies feature the role of bipolar or multi-polar GVC governance, where more
complicated patterns of power relations emerge between lead rms in GVCs (Fold, 2002;
Islam, 2008;Kawakami, 2011). For example, in the automobile industry, one of the
paradigmatic producer-driven chains, the rise of “mega suppliers” is challenging the
pre-eminent role of the carmakers as lead rms and altering the balance of power in
the industry (Foy, 2014). There are now 16 major car manufacturers that sell more than
1 million vehicles per year, but those cars are built from parts supplied by just ten major
component makers[3], meaning that auto assemblers are now reliant on a small cadre of
mega suppliers who each sell parts to rival assemblers. Although the automakers are
still considerably larger than the mega suppliers in sales, the latter are more protable
than the companies they sell to[4]. While mega suppliers are in a position to bargain
more effectively with global automakers[5], the latter remain in the driver’s seat in terms
of overall governance of the automotive value chain because they determine when,
where and at what price they will sell fully assembled vehicles to customers around the
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Upgrading: economic and social dimensions
Upgrading refers to “a process of improving the ability of a rm or an economy to move
to a more protable and/or technologically sophisticated capital- and skill-intensive
economic niche” (Geref, 1999, pp. 51-52). The concept originated in the observation that
what matters for a country’s development was less the overall level of industrialization
than the type of chain activities they were involved in. In other words, a country or rm
obtains bigger gains when they move up the value chain into higher value-added chains
or nodes (Geref and Kaplinsky, 2001).
A central argument of the GVC approach is that the type of governance structure
signicantly affects upgrading outcomes. Humphrey and Schmitz (2002) specify four
types of upgrading, representing different “niches” where upgrading takes place:
(1) Process upgrading: Making production processes more efcient by reorganizing
the production system and using advanced technology;
(2) Product upgrading: Moving into more sophisticated, or high-value, product
(3) Functional upgrading: Occupying more protable functional nodes within a
chain; and
(4) Chain upgrading: Diversifying into more protable value chains.
GVC studies have found that product and process upgrading are facilitated by learning
from global buyers, whereas global buyers do not necessarily facilitate functional
upgrading (Schmitz, 2004). For example, in Brazil’s Sinos Valley shoe cluster, tight
coordination by foreign buyers created favorable conditions for local suppliers to
achieve product and process upgrading (Bazan and Navas-Alemán, 2004). However,
upgrading to higher-value activities like branding and design was constrained by a
captive mode of governance (Giuliani et al., 2005;Lee and Chen, 2000). Functional
upgrading was out of reach when global buyers were reluctant to support it, or actively
blocked it out of concern that it might bring greater competition (Bazan and
Navas-Alemán, 2004). Similarly, American buyers contributed to the process and
product upgrading of local blue jeans producers in Torreon, Mexico, giving rise to
full-package production. Yet, more extensive functional upgrading did not take place
because of the risks that such upgrading posed for MNE lead rms (Bair and Geref,
In much of the GVC literature, there has been an implicit presumption that economic
upgrading would lead to social gains, i.e. the improvement of the well-being of workers
in the chains. Yet, recent evidence suggests that economic upgrading is often not
accompanied by social upgrading, and indeed, it can worsen social conditions (Lee et al.,
2011). Social upgrading refers to the process of improvement in the rights and
entitlements of workers as social actors and enhances the quality of their employment
(Barrientos et al., 2011). A series of studies from the Capturing the Gains research
program[6] have found that upgrading is segmented. For example, regular workers may
benet from higher wages and strong labor standards as a result of economic
upgrading, while many others, particularly women and migrant workers, are put in
highly exible, unprotected and insecure work. Poor jobs are fuelled by low
productivity, subcontracting and suppliers struggling to meet buyers’ requirements on
product quality as well as social and environmental standards. Progress made in
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measurable standards (e.g. the size and type of employment, wages and working hours)
may not extend to enabling rights (e.g. freedom of association and the right to collective
bargaining), with many export sectors suffering an extremely low level of unionization
(Barrientos et al., 2012).
In short, with the concepts of governance and upgrading, the GVC approach provides
a rm-based, network-centric view of how MNEs as global lead rms affect economic
and social development. The role of MNEs in promoting or inhibiting development
extends beyond their hierarchical boundary to a series of GVC linkages they govern in
various ways: driving, coordinating and normalizing. The GVC literature also suggests
that the scope and speed of upgrading and the gains from it largely depend on a rm’s
position and the types of governance in place in the GVC, and economic upgrading does
not necessarily lead to social upgrading.
Changing GVC dynamics and the impacts on emerging economies and RP
The global economy has undergone signicant changes over the past two decades, and
the emerging economies have been clear winners. Whereas the share of high-income
countries in total value added that was generated in all manufacturing GVCs declined
from 74 per cent in 1995 to 56 per cent in 2008, and the share of Japan and the East Asian
newly industrializing economies (NIEs) declined from 21 to 11 per cent, emerging
economies have increased their shares of value added in manufacturing by 18 per cent.
China alone is responsible for half of this increase, with its global share rising rapidly
from 4 to 13 per cent, but value added shares also increased in other emerging
economies, including Brazil, Russia, India and Mexico (Timmer et al., 2014, p. 109).
During this same period, 42 million manufacturing jobs were added in China, 20 million
in India, 6 million in Brazil and 2 million in Mexico (Timmer et al., 2014, p. 112).
More recently, the global recession of the late 2000s precipitated sharp shifts in global
production and trade, with major implications for the role played by emerging
economies and RP rms in GVCs (Cattaneo et al., 2010;Geref, 2014). In this section, we
discuss the key dynamics of GVCs in the post-crisis global economy from three angles:
geographic and value chain concentration; shifting end markets and regionalization;
and synergistic forms of GVC governance. However, this analysis should rst be related
to the growing literature on RPs and RP rms in IB studies.
Nadvi (2014) has provided a clear and useful operational denition of “rising powers”
that emphasizes six features: rapid and sustained economic growth; increasing
participation in international trade with dominance in particular sectors; signicant
economic scale, including population, natural resources, a manufacturing base and a
sizeable domestic market; a strong role of the state; local capital (both private and public)
with an expanding international presence; and a growing voice for civil society.
Although these large emerging economies (the term we will use in this article) were
initially associated with the BRICs (Brazil, Russia, India and China), they now include
more than a dozen countries with similar features, including Mexico, Indonesia, Nigeria
and Turkey (the “MINT” countries), South Africa and others (Sinkovics et al., 2014b).
While the emerging economies indeed play a central role in GVC analysis, the more
controversial issue is the status of RP rms. If “rising powers” refer to countries such as
China, India, Brazil, Russia and South Africa, which are on rapid economic growth and
development trajectories, then RP rms can be thought of as emergent and with a clear
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strategic intent to challenge the Western and dominant forms of economic organization
(Sinkovics and Yamin, 2012). A more contentious issue, however, is whether RP rms
are merely emulating or “catching up” with MNEs from the advanced industrial
economies, or whether they are fundamentally “changing the rules of the game” in the
contemporary global economy (Sinkovics et al., 2014b). Within the traditional IB
literature, the paradigm typically used to address this question is John Dunning’s
eclectic ownership, location, and internalization (OLI) model[7](Luo and Tung, 2007),
sometimes supplemented with insights from the “late comer” perspective introduced by
economic historian Alexander Gerschenkron[8](Sinkovics et al., 2014b).
From a GVC perspective, there are three shortcomings in the current literature on RP
rms. First, the characterization of RP rms tends to reect an outmoded view of the
global economy centered on large national markets and asset-seeking MNEs. In a
GVC-oriented world, value creation, value capture and economic rents occur in more
uid international production networks, where the ability to shape innovation processes
and labor and environmental outcomes often resides in the distribution and retail
segments of GVCs (Hamilton et al., 2011), and not only in the production activities and
OLI advantages of RP manufacturing and resource-based rms. The varied nature of
GVC governance structures is typically absent in the analysis of RP rms.
Second, the RP literature usually tries to categorize RP rms as different in kind from
MNEs in the earlier set of East Asia’s NIEs, namely, Hong Kong, Taiwan, Singapore and
South Korea (Luo and Tung, 2007, p. 483). While there clearly are key distinctions
between today’s emerging economies and the East Asian NIEs, beginning with
economic scale, notable examples exist where MNEs from the NIEs are tightly
integrated into the economies of rising powers, especially China, and indeed link them to
the global economy in signicant ways that have been directly responsible for the
economic dynamism that is one of the dening features of the RP. Li & Fung, the largest
trading company in the world, is headquartered in Hong Kong but does most of its
sourcing from China[9]. Similarly, Foxconn Technology Group, the largest electronics
contract manufacturer in the world, has its home ofce in Taiwan, but its production
and exports for leading brand name multinationals like Apple are concentrated in
mainland China, where it employs more than 1 million workers, making it by far the
largest private employer in the country. In terms of GVC dynamics, Li & Fung and
Foxconn act like RP rms, even if their headquarters are elsewhere[10].
Third, one of the most persuasive arguments for the transformative potential of RP
rms is that they are now pursuing their own low-cost innovation strategies and trying
to leverage the growing size of the low- and middle-income segments in emerging
economies to seek “gold at the base of the pyramid” and to win the “ght for the middle”
in RP markets, while advanced country MNEs are engaged in “a race to the top”
(Sinkovics et al., 2014b, p. 677). This indeed could be a very protable upgrading
approach, but it is not limited to RP rms. The business press is full of entrepreneurial
initiatives being launched by innovative companies all around the world and not just in
emerging economies, which are empowered by the use of the Internet, pervasive digital
technologies and crowd-sourced venture capital to solve basic development problems,
like the Chilean entrepreneur who found a cheap way to give hundreds of millions of
people in the world access to clean drinking water (Wadhwa, 2013). Furthermore, one of
the leading RP rms, China-based Lenovo Group, the top vendor of personal computers
globally, is anchoring its new PC Plus strategy (based on moving beyond PCs into
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smartphones, tablets and servers) not in the China market, but in North America
(Oleniacz, 2014).
The discussion below of recent GVC trends will further illustrate these and other
points related to emerging economies and RP rms.
The geographic and organizational concentration of GVCs
Over the past decade, GVCs have become signicantly more concentrated, both
geographically and organizationally. Despite the initial expectation that the global
spread and fragmentation of production activities might lead to greater participation by
less-developed countries and smaller rms in GVCs, recent evidence in a number of
industries, from apparel to automobiles, electronics and even services, suggests that
GVCs are becoming geographically concentrated in fewer countries, especially
emerging economies with large domestic markets and robust supplier bases, such as
Brazil, China, India and South Africa (Cattaneo et al., 2010). The trend has been
intensied by the global recession as GVC lead rms streamlined their supply chains to
focus on a smaller number of large, more capable suppliers, which are strategically
located near dynamic nodes of GVCs (Geref, 2014).
The example of mobile phones is illustrative (Lee and Geref, 2013). Until the late
1990s, the entire production of mobile phones was conducted in advanced economies.
The ensuing rise of global outsourcing has shifted production to developing countries.
The ve largest exporters – China, South Korea, Hong Kong, Vietnam and the USA –
commanded 74 per cent of the world’s exports in 2012, with China alone representing a
half of them[11](Lee and Geref, 2013). As a result, mobile phone production today is
clustered in several countries in Asia, notably China, South Korea and Vietnam.
Moreover, the key nodes of mobile phone GVCs are signicantly consolidated. The ve
leading rms account for more than a half of global markets in mobile phones (56 per
cent), smartphones (60 per cent), contract manufacturing (75 per cent) and smartphone
operating systems (99 per cent). Two leading rms control a big portion of each market,
such as Apple and Samsung in smartphones, which gives rise to oligopolistic market
There are several implications of this rising concentration in GVCs. First, upgrading
opportunities are unevenly distributed among countries and rms, and concentration
amplies the benets of inclusion and the disadvantages of exclusion in GVCs. As a
signicant proportion of world production and exports is dominated by a handful of
countries, the vast majority of countries and rms are marginalized with few linkages to
global industries and limited upgrading prospects. Also, the rise of large RP countries as
the prominent locations for GVC production puts pressure on other countries to cut costs
and squeeze their prots to compete. As a result, the geography of production – which
countries are in or out – is heavily affected by the decisions of a few global brands and
their key contract manufacturers.
For RP rms, rising geographic and value chain concentration has increased their
inuence in GVCs. They clearly benet from the concentration of production in
emerging economies, and at the same time, their growing capabilities enable global lead
rms to shift more production to these countries. For example, East Asian contract
manufacturers like Foxconn have taken advantage of capable supplier bases clustered
in China, as exemplied by its supply chain cities (Geref, 2009), and neighboring East
Asian countries. As global lead rms like Apple and Hewlett-Packard are keen to tap
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into more capable suppliers, RP rms are better positioned to serve global rms and
advance their positions in GVCs. The rise of large consolidated, transnational suppliers
in RP economies generates the expectation that they may check the power of global lead
rms (Appelbaum, 2008).
Actual upgrading outcomes, however, are less straightforward. Some RP rms are
big, capable and transnational, but power asymmetries in their relationship with their
global buyers still cannot be ignored. For example, Apple’s iPods and iPhones are
almost entirely assembled in China by Foxconn and Pegatron, two of the biggest
electronics contract manufacturers. Yet, the value captured by these global contract
manufacturers is extremely small compared to the gains by Apple and other high-end
component suppliers in Japan, Korea and Germany[13](Dedrick et al., 2011). Thin
margins and the fast pace of production virtually dictated by buyers signicantly
hamper their ability to improve labor conditions for workers, even after a series of
worker suicides sparked widespread criticism and intense scrutiny from the public and
the media (Chan et al., 2013;Lee and Geref, 2013).
The extent to which RP rms can contribute to the upgrading of smaller, less capable
suppliers is limited. There is some expectation that RP rms can facilitate the transfer of
technology and knowledge to smaller rms in the chain. But the extent to which RP
rms can deliver these results depends on their abilities and strategies to capture more
value in GVCs. For instance, Foxconn manufactures many parts and components
in-house as a way to compensate for slim margins in its contract manufacturing
business (Balfour and Culpan, 2010); this can limit, if not completely eliminate, their
ability to help the upgradation of smaller suppliers.
Furthermore, there continue to be questions about the innovative impact of RP rms.
Despite China’s push for greater technological autonomy and indigenous innovation, its
high-tech sectors and export performance are still heavily dependent on
foreign-invested enterprises. Of the top 20 exporting rms based in China in 2012, only
2 were Chinese-owned: Huawei and ZTE. Twelve of the top 20 exporters were based in
Taiwan (including 6 companies owned by Foxconn), and 4 were from South Korea
(Grimes and Sun, 2014, p. 66).
Shifting end markets and regionalized value chains
In the post-war world economy, international trade was premised on the fact that most
nal products were consumed in developed economies. Upgrading basically meant
serving buyers from advanced economies. For example, export-oriented
industrialization fuelled rapid economic development in the NIEs, which oriented their
development strategies to the export of manufactured goods to US and European
markets, and Western lead rms knew best how to cater to consumers in these markets
(Hamilton and Geref, 2009).
This conventional ow of international trade, however, began to change in the
mid-1980s due to economic slumps in the global North and rapidly growing market
demand in the NIEs. In 1990, 60 per cent of the world trade was between developed
countries (North-North), 30 per cent was between industrialized and developing
countries (North-South) and 10 per cent was South-South. By 2020, these three patterns
of trade are expected to be equally split, meaning that the relative weight of North-North
trade will have been cut in half in just 30 years (Lamy, 2013). A major part of this shift
is being driven by the fact that almost 60 per cent of trade in goods is now in
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intermediate products that are used as imports in the production process, especially for
exports – the so-called GVC trade (UNCTAD, 2013). While the import content of exports
was 20 per cent in 1990, this increased to 40 per cent in 2010 and it is expected to be 60
per cent in 2030 (Lamy, 2013).
The resulting shift of end markets to emerging economies was exacerbated by the
2008-2009 global recession. It had a major impact on developed economies, while large
RP countries like China, India and Brazil fared relatively better (Geref and Sturgeon,
2013). As world trade bounced back from the economic crises, developing economies
became the main engine of the recovery (Staritz et al., 2011). These emerging economies,
unlike the East Asian NIEs, have much bigger domestic markets and are rich in natural
resources. In 2005-2010, the merchandise imports of the European Union and the USA
increased only by 27 and 14 per cent, respectively, while emerging economies expanded
their merchandise imports much faster: Brazil (147 per cent), India (129 per cent), China
(111 per cent) and South Africa (51 per cent) (WTO, 2011). The import growth in
emerging economies is also driven by rising demand for intermediate goods and raw
materials because manufacturing GVCs are concentrated in those economies, as
discussed above (Kaplinsky et al., 2011).
The economic downturn in advanced industrial countries and the rise of large
emerging economies has fueled the regionalization of value chains. Regional production
networks emerged as factories and suppliers linked through GVCs were clustered into a
reduced number of strategically located countries. A notable example is the East Asian
regional production network. Strong supply bases, different levels of industrial
capabilities and complementarities between countries for nancial, technological and
human resources help the growth of cross-national production networks in the region. In
electronics, for instance, many high-end components are supplied from Japan, Korea and
Taiwan, which have strong R&D capabilities, and assembled in China with low-end
components produced locally or in other developing countries, such as Vietnam and the
Philippines (WTO and IDE-JETRO, 2011).
While such regional divisions of labor are not new (Borrus et al., 2000;Geref, 1996),
nowadays more products in diverse industries are made and consumed regionally
instead of being exported to advanced economies and RP rms play an active role in
creating a regional circuit of production and consumption. In Sub-Saharan Africa (SSA),
South African supermarkets are building up regional supply chains and spearheading
the diffusion of supermarkets across the region. So are the supermarkets from Kenya,
but on a different geographic scale. At the same time, the South African, Kenyan and
Ugandan producers have found new markets in the Middle East and Asia. This provides
SSA farmers and producers with the alternative buyers to global supermarket chains,
leading to the rise of new South-South value chains (Barrientos and Visser, 2012;Evers
et al., 2014). Similarly, South African clothing manufacturers recently entered into
neighboring countries like Lesotho and Swaziland to serve mainly South African and
other SSA markets. They work with clients like South African retailers, who also are
expanding regionally (Morris et al., 2011).
The regionalization of value chains is also driven by global lead rms. They tend to
focus on a group of countries that are proximate geographically, economically or
socio-linguistically to promote their localization strategies. Wal-Mart, for example, has
expanded its retail network across SSA with a regional scale of sourcing, logistics and
distribution operations. Similarly, Vodafone, a UK-based, multinational mobile service
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provider, operates across the SSA region to compete against major RP telecom
companies that operate regionally, such as MTN of South Africa and Bharti Airtel of
India. In this way, global regions have become a locus of competition between local,
regional and global rms, which accelerates the regionalization of value chains.
The regionalization of value chains can provide RP rms with some upgrading
advantages. First, regional markets and value chains may present alternative economic
upgrading paths where RP rms may have better chances for functional upgrading than
in global chains (Bazan and Navas-Alemán, 2004;Morris et al., 2011). Less stringent
standards and lower entry barriers with less capital and technology requirements in
regional value chains or Southern markets can facilitate smaller rms in emerging
economies to participate in exports and other forms of business abroad. Second, RP
rms can leverage their experience and knowledge of local and regional markets in the
global South to gain advantages over global rms, which often suffer from a “liability of
outsidership”, or a lack of in-depth understanding of such markets (Johanson and
Vahlne, 2009;Sinkovics et al., 2014a). For example, the so-called “frugal innovations”
(Clark et al., 2009) – developing products or services especially designed for
resource-poor settings – may present RP rms with an opportunity to bypass global
rms in serving Southern consumers, typically with lower incomes and poor services in
power supply and transportation. Such businesses tend to be low in unit margins, but
they can create a high-volume market by tapping into a large population of new
Southern consumers.
However, there are potential downsides for RP rms. The lower entry barriers of
regional or South-South value chains may work against RP rms if they are stuck in a
low-cost, low-standard market. Furthermore, the advantage of their intimate knowledge
in local markets may not last for long. For example, Chinese mobile phone makers faced
greater competition in the domestic market as global brands like Nokia and Samsung,
after struggling with localization, caught up fast and closed the gap with Chinese
competitors in terms of understanding local markets (Brandt and Thun, 2011). Thus,
local advantages in upgrading may be short-lived.
The implications of regionalization for social upgrading are less clear. Compared to
global or North-bound chains, less stringent social standards in regional value chains
and the smaller premiums Southern consumers may be willing to pay for social labels
could discourage RP rms from committing to an upgrading of working conditions in
their supply chains. Also, the “high-volume, low-cost” model in Southern markets can
have a negative impact on social upgrading for certain workers because rms in this
model tend to rely on the extensive outsourcing of “non-core” activities to a large pool of
contract workers whose employment tends to be less stable, as shown in the case of
Indian information technology and telecom rms (Sarkar et al., 2013). This may create
favorable conditions for regular, skilled “core” workers, while contract workers suffer
from precarious employment conditions.
From private standards to synergistic governance
As GVCs develop into multi-tier structures where rms in each tier outsource some of
their activities, lead rms use their own standards to govern the chains and the behavior
of the other chain actors involved. This gives rise to private standards (Mayer and
Geref, 2010), which unlike public standards that are enforced mandatorily by
governments, are promulgated and executed by rms, individually or collectively, and
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are voluntary in principle[14]. However, recent studies suggest a more limited role for
lead rms and their private standards in facilitating upgrading, especially the social
dimensions (Locke, 2013;Mayer and Geref, 2010), which has led to calls for synergistic
forms of private, public and social governance (Geref et al., 2014;Mayer, 2014)[15].
There are different types of private standards in GVCs (Ponte and Gibbon, 2005).
Quality standards involve a wide range of product quality, including product safety.
Quality standards, such as GLOBALGAP (Good Agricultural Practice), have become
critical in GVCs as a number of rms in different countries affect the quality of nal
products. Growing demand for product differentiation among consolidated lead rms
increases the need for private quality standards. Another expanding area is social and
environmental standards (Nadvi, 2014). Global lead rms are increasingly facing public
pressure to make their supply chains socially and environmentally sustainable. Any
corporate wrongdoings in their supply chains could eventually inict reputational
damage on lead rms even if the factory is not owned by them.
Private standards have upgrading implications for rms in developing countries
(Humphrey, 2006;Lee et al., 2012). Complying with standards requires commitments to
various activities, from additional documentation to facility improvement, which incur
added costs to the rms. Thus, standards can work as entry barriers for smaller
suppliers or producers that tend to have limited resources. In agri-food chains, for
example, large food manufacturers and supermarkets are increasingly rationalizing
their supply chains to work directly with a smaller number of preferred, mostly large,
suppliers capable of meeting their stringent requirements, thereby marginalizing
smallholders unable to comply the standards (Maertens and Swinnen, 2009). By
contrast, higher standards can be a catalyst for upgrading. Improving production
techniques and product quality to meet higher requirements permits participation in
high value-added chains. For example, some smallholders in developing countries have
been successful in niche markets for organic and fair trade-certied products,
differentiating themselves from non-certied producers (van Beuningen and Knorringa,
Over the past decade or so, the “compliance-based model” (Locke et al., 2009)of
governing GVCs through private standards aimed at improving quality, social and
environmental outcomes has proven inadequate to address these concerns. With regard
to labor conditions, the ineffectiveness of the compliance model has been under intense
scrutiny following a series of highly publicized tragic events. Dozens of worker suicides
in Foxconn’s factories in China since 2010 shed light on horric conditions that confront
those who assembled high-tech products like the iPhone. The latest building collapse in
Bangladesh that killed over a thousand garment workers in 2013 illuminates the
precarious factory conditions under which garments are manufactured by suppliers for
global retail and apparel brands like H&M, Zara and Tesco. In many of such cases,
contributing to these undesirable conditions are the buyers’ own purchasing and supply
chain management practices, such as cost-cutting, shortening lead times and
last-minute changes, which often make the supplier unable to observe their labor codes
(Barrientos, 2013).
The limited impact of the compliance model has led to a search for alternative paths
for social upgrading (Geref and Luo, 2014). More attention is being given to joint
actions by multiple stakeholders to combine compliance monitoring with capability
building so that supplier can learn how to address labor issues on their own (O’Rourke,
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2006). Moreover, bottom-up approaches highlight the importance of local
embeddedness. While developing country rms tend to be portrayed as
“standard-takers”, they can initiate their own effort to improve working conditions,
often collectively within clusters (Lund-Thomsen and Nadvi, 2010). Active roles can be
played by workers and labor unions in GVCs, who often are the best monitors on the
ground (O’Rourke, 2006) and who have considerable power to disrupt the supply chains
in their bargaining with employers (Selwyn, 2013).
Finally, in the face of workers’ grievances and public criticisms over undesirable
labor conditions, governments need to enforce stricter labor laws and regulations and
actively police labor abuses. Government actions can go beyond the traditional
law-enforcing role and adopt innovative and experimental approaches by collaborating
with private and civil actors (Locke, 2013). Different forms of governance can work
together to complement each other (Amengual, 2010), and this can lead to “synergistic
governance” (Mayer, 2014). To make this happen, one needs to go beyond the factory as
the unit of analysis (and intervention) to take into account a broader array of governance
forms and public and civil society actors that could complement private GVC
governance and global lead rms (Geref et al., 2014).
Our discussion of the changing dynamics of GVCs in the post-crisis global economy
underscores the important yet complex role of GVCs in shaping economic and social
outcomes for RP rms and emerging economies. Rising geographic and organizational
concentration in many GVCs leads to an uneven distribution of upgrading opportunities
that should favor RP rms. Similarly, the rise of emerging economies as new end
markets for GVCs and the regionalization of value chains can benet RP rms. RP rms
can play a signicant role in reconstructing GVCs by building up regional supply chains
and retail networks and South-South value chains. These can provide alternative
markets where RP rms complete with global rms on better terms, either with more
local knowledge or business models uniquely suited to developing country markets. At
the same time, without further upgrading, such competitive advantage may be
short-lived or only sustainable at the expense of worsening labor conditions for
marginalized workers.
However, this article has also challenged some of the current stereotypes about RP
rms. They need to be analyzed within the context of contemporary GVCs, not just as
the newest variety of “third world multinationals”. MNEs from the East Asian NIEs
have had a strong inuence not only on the export performance of emerging economies,
particularly China, but also on their innovation potential. As RP rms become fully
integrated into GVCs, their global strategies can be powerfully inuenced by their
linkages to advanced countries as well as their domestic markets[16].
In terms of new patterns of GVC governance focused on social upgrading, the
inability of voluntary corporate codes to address the root causes of poor labor conditions
in the factories linked to GVCs has led to the call for joint governance systems built
through a cooperation of MNEs, local rms and transnational and local NGOs, labor
unions and governments on various levels. It remains to be seen whether such
cooperative governance can address a wider array of social development issues beyond
workplace and workers’ rights. Thus, the conditions under which social value and
benets are likely to be co-created within and across private, public or civil sector
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(Sinkovics et al., 2014a) can be one of the topics on which GVC and critical IB scholars
can fruitfully collaborate. In such an endeavor, critical IB scholarship could contribute to
the GVC approach by providing a deep understanding of MNEs’ hierarchical
governance, various business strategies beyond supply chain management and internal
decision-making and coordination process across different geographies.
1. Global production network (GPN) research has many commonalities with the GVC approach,
as both pay close attention to fragmented and dispersed production systems across national
borders. Efforts to distinguish the two perspectives highlight the former’s relative emphasis
on local institutions and embeddedness (Coe et al., 2008;Henderson et al., 2002;Hess and
Yeung, 2006), while GVC analysis deals more specically with vertical commercial linkages
and the role of power in global supply chains (Bair, 2009;Ponte and Sturgeon, 2014). This
paper, however, focuses on the GVC literature to highlight its potential contribution to the
critical IB literature. For a comparison of the GPN and GVC literatures, see Sturgeon (2001,
2009) and Neilson et al. (2014).
2. By 2011, Nike’s products were made in 930 factories in 50 countries, employing more than 1
million workers. However, Nike itself had just 38,000 direct employees, most of whom work in
the USA. Nike’s $15 billion in total sales included $10.3 billion for footwear and $5 billion for
apparel. However, just 73 of Nike’s 930 suppliers in 2011 were producing shoes, and most were
located in Asia (Locke, 2013, p. 48). This highlights the fact that similar industries in terms of
products often have contrasting forms of industrial organization, GVC governance structures
and upgrading outcomes, even with the same lead rm. This is true of Nike’s buyer-driven
footwear and apparel suppliers: offshore footwear factories are relatively large,
capital-intensive operations, which Nike was able to monitor much more closely, while
garment factories are usually smaller and highly labor-intensive operations, leading to much
greater volatility in performance and compliance with Nike’s corporate codes of conduct.
3. The biggest car part suppliers (with 2013 revenues in parentheses) include Bosch ($67.5
billion, 2012); Continental ($44.3 billion); Denso ($43.3 billion); Johnson Controls ($42.7 billion)
and Magna International ($34.8 billion). Some of the leading car companies they supply
include Honda Motor ($119.5 billion), Fiat ($115.3 billion) and BMW ($101 billion) (Foy, 2014).
The global top 10 auto parts suppliers account for 60 per cent of total revenues of the world’s
100 largest automotive suppliers.
4. Operating margins of the ten largest automotive suppliers are about 4 percentage points
higher, on average, than those of the ten biggest carmakers (Foy, 2014).
5. The role of mega suppliers in the automotive value chain is paralleled by the rise of global
contract manufacturers in electronics (Sturgeon and Lester, 2004), and large-scale systems
integrators in the aircraft and shipbuilding industries (Geref et al., 2013).
6. “Capturing the Gains” is an international research network to examine the relationship
between economic and social upgrading in GVCs. The project publications, working papers,
policy briefs and other activities are listed at
7. The three main components of the OLI eclectic paradigm are: ownership advantages,
locational advantages and internalization advantages.
8. For an updated version of the “late comer” thesis applied to developmental states in East Asia
and elsewhere, see the discussion of “compressed development” in Whittaker et al. (2010).
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9. Li & Fung has about 15,000 suppliers globally and operates in more than 40 countries (Fung,
10. A similar argument could be made with respect to the dynamics of “triangle manufacturing”
whereby MNEs from the East Asian NIEs played a critical role in extending production in
GVCs to a broad range of low-cost locations that included small countries as well as RP
economies, thereby creating more exible sourcing networks that leveraged quota and
regional trade agreement constraints and preferences in ways that increased participation by
low-income economies, including RPs, in GVCs (Geref, 1999). This is perhaps most clearly
visible in the global apparel industry; see Morris et al. (2011) on South Africa’s links to Lesotho
and Swaziland and Bair and Geref (2014) on how East Asian production networks in
Nicaragua are leveraging features of the Central America Free Trade Agreement (CAFTA)
and North American Free Trade Agreement (NAFTA) trade agreements.
11. Similarly, over 40 per cent of the world’s apparel exports came from China alone, and the top
5 leading exporting countries accounted for 60 per cent of world export value in 2010
(Bernhardt, 2013).
12. Figures on mobile phone sales (2012) and smartphone OS (2012, 4Q) are from Gartner (2013b).
Smartphone sales gures (2013, 2Q) are from Gartner (2013a). Market shares in contract
manufacturing (2010) are from NIPA (2011).
13. US-based Apple is estimated to capture between one-third and one-half of an iPod’s retail
price; Asian rms, like Toshiba from Japan and Samsung from South Korea, capture the
largest manufacturing shares as prots from high-value components, such as the hard-disk
drive, display and memory; and the assembly and testing activities by Chinese workers get
just 2 per cent of the nal product price (Timmer et al., 2014, p. 99).
14. Private standards can be mandatory in a de facto sense if complying with them is a
precondition for participation in the GVC.
15. Public governance involves rules and regulations set by various levels of governments in
nation-states and supra-national entities like the International Labor Organization. Social
governance is driven by civil society actors such as non-governmental organizations (NGOs)
and labor unions. It includes codes of conduct initiated by NGOs and multi-stakeholder
initiatives, such as Ethical Trade Initiative.
16. This is the case of India’s role in the dynamic offshore services GVC, which began with “body
shopping” in the US. economy in the late 1990s in response to the perceived need to rewrite
massive amounts of software code to avert a potential Y2K crisis, and has evolved to the point
where India has some of the world’s leading offshore services MNEs, such as Infosys, Wipro
and Tata Consultancy Services, but still oriented to global clients (Fernandez-Stark et al.,
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... Fast growth in large emerging economies, like China and India, gave rise to increasing numbers of emerging market multinational enterprises (Cuervo-Cazurra & Ramamurti, 2014;Guillen & Garcia-Canal, 2009;Ramamurti & Singh, 2009;Sauvant, 2009). Some of these emerging market multinationals have become dominant players in their industries (Aguiar et al., 2012;Lee & Gereffi, 2015;Pananond, 2013;Pananond & Giroud, 2016) thanks to processes of capability improvement (Cuervo-Cazurra, Newburry, & Park, 2020; Gammeltoft & Cuervo-Cazurra, 2021;Williamson, Ramamurti, Fleury & Fleury, 2013), learning-by-doing (Rui, Cuervo-Cazurra, & Un, 2016), and strategic mergers and acquisitions (He, Khan & Shenkar, 2018;Madhok & Keyhani, 2012). Their transformation questions the typical theorization of GVCs and opens opportunities for rethinking emerging market firms' participation in GVCs (Azmeh & Nadvi, 2014;Giuliani, de Marchi, & Rabellotti, 2018;Horner & Nadvi, 2018;Pananond, 2015;Sako & Zylberberg, 2019;Tessman, 2017). ...
... The growth of large emerging economies, such as China and India, has shifted the context of GVC. These large emerging economies are crucial players in polycentric trade and investment (see articles in the special issue edited by Horner & Nadvi, 2018), and firms that were once suppliers in these economies have become more dominant players in GVCs (Lee & Gereffi, 2015). Increasing calls for attention have been advocated in the GVC field to analyze how lead firms in emerging economies have evolved (Horner, 2016;Sinkovics, Sinkovics, & Archie-Acheampong, 2021;Sako & Zylberberg, 2019). ...
... At the same time, they also indirectly learn how to serve more demanding consumers and meet their higher standards in advanced economies through collaboration with the advanced economy lead firms (Kano, 2018). By serving as suppliers to advanced economy lead firms, emerging market firms join the value chain of many global industries, such as agriculture, apparel, electronics, and automotive (Lee & Gereffi, 2015;Gereffi, 2019;Horner & Nadvi, 2018;Sako & Zylberberg, 2019). ...
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Extending the resource-based view that location characteristics influence firms’ resources and internationalization, we argue that the global value chains (GVCs) of lead firms from emerging and advanced economies differ in three dimensions: objectives, trajectory, and governance. First, because GVC objectives are driven to resolve home-country endowment deficiencies, we propose that emerging market lead firms use GVCs to upgrade resources while advanced economy lead firms do so to distribute activities. Second, as GVC trajectory reflects home country consumer characteristics, we argue that emerging market lead firms expand abroad to accumulate additional value-added segments of their GVCs to serve more sophisticated demands, while advanced economy lead firms disaggregate simplified segments to reduce costs. Third, since GVC governance reflects the home-country institutional quality, we propose that emerging market lead firms use more internalization, particularly acquisitions, to exert control in their GVCs, while advanced economy lead firms rely more on externalization, especially offshore outsourcing.
... Finally, the upgrading dimension elaborates on how firms or regions improve their technological and managerial skills to engage in greater value-adding stages in a chain [48,56]. For instance, firms or regions may develop more efficient and innovative production systems (process upgrading) or differentiate their products and develop product innovation (product upgrading) [57]; this upgrading process can be ignited by firms' suppliers [58]. ...
... Upgrading activity). Such components allow for the improvement of technological capabilities and firms to engage in greater value-adding activities, which in turn refers to the value chain upgrading dimension [56]. Therefore, we propose: Proposition 3. Framework conditions are required for actors to improve their value-adding capabilities within the chain, to further develop their processes and products, i.e., upgrading. ...
Despite the growing interest in the concept of entrepreneurial ecosystem (EE), the structure of value-adding activities within ecosystems remains overlooked. Therefore, in this paper we explore a possible conceptual interplay between the EE and the global value chain (GVC) literature. We do so by analyzing the case of the cultivated meat (CM) innovation EE of Singapore. Through secondary data and in-depth interviews, it was possible to describe major framework and systemic conditions of the CM Singaporean EE. Such EE conditions were discussed in relation to the evolving cultivated meat chain, in terms of input-output structure, geographic scope, upgrading activity, and chain governance. This, in turn, provided insights that allowed for the conception of a set of seven propositions, which open new avenues for understanding EEs, GVCs, and their interplay in emerging high-tech industries. Moreover, by bringing light to such interplays, our work may contribute to entrepreneurs' and policymakers' activity, so that the transition in the way we produce food contributes to improving social conditions for all.
... However, economic upgrading following structural change does not necessarily generate social upgrading (i.e., access to better work opportunities, including meas ur a ble standards, wages, and conditions, and enabling rights such as freedom of association and non-discrimination). For instance, the position of firms and workers within the value chain, the type of work performed, and the status of workers will influence the capacity to achieve inclusion and social upgrading through structural change (Barrientos et al. 2011(Barrientos et al. , 2016a(Barrientos et al. , 2016bBernhardt and Pollack 2016;Brewer 2011;Lee and Gereffi 2015;Milberg and Winkler 2011;Tokatli 2013). ...
... At the micro-level of analysis, inclusion might result from technology transfer and technological upgrading, depending on a set of further conditions and contextual characteristics. The literature has identified, among these, the appropriateness of technology (Kaplinsky 2011;Hanlin and Kaplinsky 2016); measurable standards and enabling rights (Barrientos et al. 2011(Barrientos et al. , 2016a(Barrientos et al. , 2016bBernhardt and Pollack 2016;Brewer 2011;Lee and Gereffi 2015;Milberg and Winkler 2011;Tokatli 2013); user involvement (Foster and Heeks 2013;Kaplinsky 2011;Zeschky et al. 2011) and institutional inclusiveness (Acemoglu and Robinson 2012;Acemoglu et al. 2005;Altenburg 2009;Farole et al. 2011).7 The mechanisms that affect inclusive outcomes of innovation are even less explored. ...
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This book synthesizes and interprets existing knowledge on technology upgrading failures as well as lessons from successes and failures in order to better understand the challenges of technology upgrading in emerging economies. The objective is to bring together in one volume diverse evidence regarding three major dimensions of technology upgrading: paths of technology upgrading, structural changes in the nature of technology upgrading, and the issues of technology transfer and technology upgrading. The knowledge of these three dimensions is being synthesized at the firm, sector, and macro levels across different countries and world macro-regions. Compared to the old and new challenges and uncertainties facing emerging economies, our understanding of the technology upgrading is sparse, unsystematic, and scattered. While our understanding of these issues from the 1980s and 1990s is relatively more systematized, the changes that took place during the globalization and proliferation of GVCs, the effects of the post-2008 events, and the effects of the current COVID-19 and geopolitical struggles on technology upgrading have not been explored and compared synthetically. Moreover, the recent growth slowdown in many emerging economies, often known as a middle-income trap, has reinforced the importance of understanding the technology upgrading challenges of catching-up economies. We believe that the time is ripe for “taking stock of the area” in order to systematize and evaluate the existing knowledge on processes of technology upgrading of emerging economies at the firm, sector, and international levels and to make further inroads in research on this issue. This volume aims to significantly contribute towards this end.
... Gereffi, G. stands out as the most published author of the subject. Although he presents investigations not only in the agrifood sector, but he is also one of the pioneers of the global value chain concept (Gereffi et al., 2005;Gereffi, 2014;Barrientos et al. 2011;Gereffi & Lee, 2012, 2016Lee et al., 2010;Lee & Gereffi, 2015). That is why most publications were theoretical, searching to discuss the concepts of this subject in several sectors, including the agrifood one. ...
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Governance in agrifood global value chain: the scientific field in the recent 15 years 1 Governança na cadeia global de valor agroalimentar: o campo científico nos últimos 15 anos Abstract: Sustainable agrifood global value chains depend on chain governance by the lead firm and transaction governance. However, the link between them is still unclear. We therefore investigated the scientific field on "governance in agrifood global value chain" over 15 years in the Scopus and Web of Science databases through two analyses: a descriptive bibliometric and a keywords co-occurrence analysis. Our descriptive results show that the research on the theme has increased over the years, with a concentration of the papers published in countries such as the United States, the United Kingdom and the Netherlands, with emphasis on Wageningen University. The network graph showed a multidisciplinary theoreticomplcal field and four axes: chain governance; transaction governance; horizontal relationships; political and structural elements. The chain and the transaction governance are indirectly linked by the concept of upgrading, compromising sustainability's holistic view. Although the sustainability of the chain depends on both levels of governance, this bibliometric study showed that there is a gap to be filled in this topic. We propose a study in the light of both concepts, considering upgrading, vertical and horizontal relationships, as well as public policies. Resumo: Cadeias globais de valor agroalimentares sustentáveis dependem da governança da cadeia pela empresa líder e governança da transação. No entanto, a ligação entre elas ainda não está clara. Investigou-se, portanto, o campo científico sobre "governança na cadeia global de valor agroalimentar" em um período de 15 anos, nas bases de dados Scopus e Web of Science, por meio de duas análises: uma bibliométrica descritiva e uma análise de co-ocorrência de palavras-chave. Os resultados descritivos mostram que a pesquisa sobre o tema tem aumentado ao longo dos anos, com uma concentração de publicação em países como os Estados Unidos, Reino Unido e Holanda, com destaque para a Universidade de Wageningen. O gráfico de rede mostrou um campo teórico multidisciplinar e quatro eixos: governança da cadeia; governança de transações; relações horizontais; elementos políticos e estruturais. Governança da cadeia e da transação estão indiretamente ligadas pelo conceito de upgrading, comprometendo uma visão holística sobre sustentabilidade. Embora a sustentabilidade da cadeia dependa dos dois níveis de governança, este estudo bibliométrico mostrou que há uma lacuna a ser preenchida nesse tema. Propomos um estudo integrando ambos os conceitos, considerando upgrading, relações verticais e horizontais, bem como políticas públicas. Palavras-chave: upgrading, sistema alimentar, agronegócio, transição, instituição.
... These have proved extremely effective at extracting surplus-value and have, in part, driven deindustrialization in many wealthy countries, while maintaining dependency in low and middle-income countries. Much of the literature on value chains focuses on how marginalised participants such as primary producers or workers can increase their representation in various value chain activities and therefore 'upgrade' their share of governance and value (see Bair, 2005;Humphrey, 2004;Lee & Gereffi, 2015). However, this literature suffers from a notable lack of critical engagement with concepts of unpaid labour and wage theft as central to value chain reproduction. ...
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Production in knowledge and data‐intensive industries is powered by work that can, in theory, be done from anywhere, via cloudwork platforms. Cloudwork platforms govern data value chains in distinct ways to concentrate power and extract value at the global scale. We argue that unpaid labour is a systemic mechanism of accumulation in these digital value networks. In this paper we demonstrate how it is tied to platform business models and facilitated by elements of platform governance including monopsony power, a high degree of spatial flexibility in sourcing labour, regulatory unaccountability and digital enclosure. We draw on a survey of 699 workers on 14 platforms in 74 countries to show that unpaid labour is an engine of South–North value extraction, and workers in the global South perform more unpaid labour than counterparts in the global North. Our findings have important ramifications our understanding of the changing international division of labour and platform capitalism.
... GVC is carried out to encourage socio-economic improvement. The steps needed are synergistic governance through the cooperation of private, public and social actors, both at the global and local levels (Lee and Gereffi, 2015). ...
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Purpose – Products originated from cocoa are globally popular. Therefore there is an economic significance in developing the cocoa-based industry. Indonesia, as one of the countries having good quality cocoa specimens, should benefit from this commodity. However, the cocoa-based industry has not contributed much to Indonesia’s GDP. Thus, this paper seeks to understand Indonesia’s cocoa industry’s position within the cocoa industry’s global value chain and any difficulties that prevent the cocoa-based industry from flourishing in Indonesia. Approach - This paper drew from the literature on the cocoa industry in Indonesia and the cocoa global value chain. Findings - This research shows that Indonesia’s underdeveloped cocoa industry lacks an understanding of Indonesia’s cocoa value in the global value chains. This lack of understanding is prevalent in the Indonesian economic bureaucracy and local cocoa industrial actors’ perspective. Novelty – In the study of political economy, the optimization of economic benefits can be achieved through good synergy in political policies to support the achievement of maximum value added for a leading commodity in a country. When the synergy among the stakeholders is optimal, the implemented regulations can be adequately implemented.
International vertical alliances (IVAs) have garnered increasing scholarly interest in the strategy and international business (IB) literature. Our review of 111 papers published in major IB journals from 2000 to 2020 sheds light on the antecedents, key mediators, moderators and outcomes of IVAs. To generate insights, we juxtaposed forward and backward alliances and compared IVAs with their domestic vertical and horizontal counterparts. In this paper, we highlight key areas for future IVA research, including—but not limited to—broadening the scope of the investigation in order to integrate new theories and methods suited to examine such alliances in the IB field.
The association between natural resources and environmental destruction has major ramifications for the ecosystem, and technological innovations are considered an imperative tool to address these challenges. Therefore, this study examines the dynamic association between natural resources, technological innovation, and environmental sustainability using annual data of newly industrialized countries (NICs) from 1990 to 2019. We applied advanced panel cointegration techniques and confirmed that natural resources and technological innovations have a stable long-term association with ecological sustainability. The long-run results from the Cross-Sectional ARDL estimator indicate that natural resource rent limits environmental sustainability while green technological advancements help reduce ecological deterioration. Similar findings are observed in the short run; however, the coefficients’ magnitudes are higher in the long run. Moreover, the validity of the Environmental Kuznets Curve (EKC) hypothesis is also confirmed in NICs. These results are consistent with robust alternative estimators and emphasize the significance of suitable policies for efficient natural resources management through technology innovations and the accomplishment of sustainable development goals.
Purpose: Drawing on organizational learning and dynamic capabilities literature, this study explores how suppliers from traditional emerging economies (STEE) can acquire, assimilate, and utilize new knowledge essential for the development of production and marketing capabilities. These capabilities then facilitate suppliers in climbing the value chain from B-to-B to B-to-C. Design/methodology/approach: The study adopted a longitudinal and multiple case study design to examine the practices of suppliers operating in a traditional emerging economy setting. We selected the Pakistan textile industry as an empirical setting, which is a predominantly supplier market for global buyers. Data sources entail semi-structured interviews with top executives and senior-level managers in four case firms and secondary data obtained from diverse sources. Findings: The study identified transitionary phases of capabilities development that are facilitated by boundary-spanning knowledge acquisition and transformation in a dynamic manner. These capabilities are essential for a supplier’s entry into downstream international markets (i.e., launching its own products/brands in the end consumers’ market). Originality: This study advances the recent academic discussion that focuses on learning by supplying and the value-chain movement of suppliers (i.e., B-to-C) from their B-to-B engagements. The findings identified the vital and beneficial role of long-term relationships with the global value chain in learning and capabilities development that led to value creation in the traditional emerging economy. Practical implications: The findings could help managers in STEEs to understand the the strategic importance of supply chain ties in their learning and capabilities development. It also provides strategic insights on what, how, and why involved parties do engage over an extended period of time. Moreover, the findings of this study could help other firms to know and adopt the right type of technology(s) and systems that help the firm reduce the technological gap in producing and marketing the market-winning products. Keywords: Learning, Dynamic Capabilities, Global Value Chain, Buyer-Supplier Relationships, Textiles and Apparels
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This paper examines the role of technological innovations on structural transformation on economies of Africa. To attain this objective, it uses a sample of 32 African countries. The estimation techniques are system GMM and two stage least Square. Results indicate that technological innovations, as measured by total patents applications, have a significant effect on per sector value added. This result supports the almost nonlinear relationship of structural transformation since this study shows that manufacturing is the dominant sector in the promotion of structural changes as far as the implementation of technological innovations is concerned. Also, our results highlight that with regards to the African context, manufacturing is the sector in which technological innovation has the greatest impact on per sector value added and by so doing, it promotes structural transformation than other sectors (services or agriculture sector). As policy implication, governments need to encourage technological infrastructure through private and public spending on research and development especially for agricultural development to foster structural transformation.
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Like many other low-income industrializing economies, Nicaragua’s export sector relies heavily on apparel manufacturing for revenues and employment. However, at least among the major garment-producing countries in the Western hemisphere, Nicaragua is unique: unlike the majority of its neighbours in Latin America, its apparel industry has expanded since 2005. In this sense, Nicaragua’s experience counters a general trend in the global garment industry towards greater concentration in Asia, and particularly China, the world’s largest clothing exporter.
Since the late 1980s, outsourcing and offshoring by large multinational electronics hardware manufacturers have driven the formation of global value chains (GVCs) producing a wide range of products, especially in East Asia. The rise of Taiwanese notebook personal computer (PC) manufacturers is, perhaps, the most striking example. By 2008 Taiwanese contract manufacturers accounted for approximately 92% of worldwide shipments of notebook PCs (Information Industry Yearbook 2009 Compilation Team 2009). In addition to manufacturing, they have increasingly provided product design services in their role as original design manufacturers (ODMs) for brand name PC firms such as Dell, HP (Hewlett Packard), Apple, and Toshiba.
'Local Enterprises in the Global Economy is an important contribution to a debate that is currently gathering momentum throughout the social sciences. At the core of this debate is the role of regions in economic development processes, not only in the more economically advanced countries of the world, but also - and more urgently - in low- and middle-income countries. With its emphasis on the need for local economic development strategies to deal with intensifying global opportunities and threats, this book pushes the debate forward into hitherto largely uncharted territory.'- Allen J. Scott, University of California, Los Angeles, US This book opens a fresh chapter in the debate on local enterprise clusters and their strategies for upgrading in the global economy. The authors employ a novel conceptual framework in their research on industrial clusters in Europe, Latin America and Asia and provide new perspectives and insights for researchers and policymakers alike.
This book examines and evaluates various private initiatives to enforce fair labor standards within global supply chains. Using unique data (internal audit reports, and access to more than 120 supply chain factories and 700 interviews in 14 countries) from several major global brands, including NIKE, HP, and the International Labor Organization's Factory Improvement Programme in Vietnam, this book examines both the promise and the limitations of different approaches to actually improve working conditions, wages, and working hours for the millions of workers employed in today's global supply chains. Through a careful, empirically grounded analysis of these programs, this book illustrates the mix of private and public regulation needed to address these complex issues in a global economy.