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Do Global Value Chains Offer Developing Countries Learning and Innovation Opportunities?



The role of emerging economies in the global economy via embeddedness in Global Value Chains (GVCs) is increasing, but their ability to become innovation leaders is less certain. The GVC approach stresses that the inter-firm linkages afforded by being part of a chain are crucial for transferring knowledge. However, their impact on the innovation performance of the developing country firms involved in these GVCs remains controversial and requires more research. The present study provides a systematic review of the literature on developing country GVCs to investigate the learning channels used by local firms, both within (firm level, collective level) and outside of these value chains (i.e. external sources of learning), and the extent to which this activity promotes innovation. We use cluster analysis to classify the cases identified in a literature review to propose a novel typology of local GVC innovators: (a) GVC-led Innovators that achieve high levels of innovation, relying mainly on sources of knowledge within the GVC; (b) Autonomous Innovators whose innovation activity is based on external sources of learning; (c) Marginal Innovators, which constitute the largest group and are characterized by low levels of innovativeness and some use of knowledge available within the GVCs, but scarce use of external sources.
Do Global Value Chains Offer Developing Countries Learning
and Innovation Opportunities?
Valentina De Marchi Università di Padova
Elisa Giuliani Università di Pisa
Roberta Rabellotti Università di Pavia
First draft of the article Published in European Journal of Development Research (2017),
The role of emerging economies in the global economy via embeddedness in Global Value Chains
(GVCs) is increasing, but their ability to become innovation leaders is less certain. The GVC
approach stresses that the inter-firm linkages afforded by being part of a chain are crucial for
transferring knowledge. However, their impact on the innovation performance of the developing
country firms involved in these GVCs remains controversial and requires more research. The
present study provides a systematic review of the literature on developing country GVCs to
investigate the learning channels used by local firms, both within (firm level, collective level) and
outside of these value chains (i.e. external sources of learning), and the extent to which this activity
promotes innovation. We use cluster analysis to classify the cases identified in a literature review to
propose a novel typology of local GVC innovators:
(a) GVC-led Innovators that achieve high levels of innovation, relying mainly on sources of
knowledge within the GVC; (b) Autonomous Innovators whose innovation activity is based on
external sources of learning; (c) Marginal Innovators, which constitute the largest group and are
characterized by low levels of innovativeness and some use of knowledge available within the
GVCs, but scarce use of external sources.
Keywords: innovation, Global Value Chain, Emerging Economies, literature review, learning,
knowledge transfer
Innovation is crucial for economic growth and sustainable economic development (Cimoli et al.,
2009; Storm, 2008). Even if there are emerging countries displaying rapid catch up trajectories in
some industries (Lee, 2013), most developing countries still suffer from lack of indigenous
technological resources and capabilities, and they mainly rely on technological transfer from
advanced countries (Hobday, 1995).
The channels through which firms can learn are many, and among them there are technology
licensing, reverse engineering, labour mobility, information and knowledge exchanges with
suppliers and buyers, learning by exporting and foreign direct investment (FDI) spillover (Lall,
1996; Barba Navaretti and Venables, 2004). More recently, the participation in Global Value
Chains (GVCs) is come to the fore as a key opportunity for developing countries to learn and access
foreign knowledge through the insertion of their firms in GVC, where intermediate goods and
services are traded in fragmented and internationally dispersed production processes. The
organization of production in the form of GVCs has become increasingly diffused as firms in
advanced countries try to be more flexible and reduce their production costs, starting to coordinate
cross-border networks of affiliates, contractual partners and arm’s-length suppliers.
The GVC approach has stressed the key role played by inter-firm linkages in transferring
technological knowledge and promoting innovation (Gereffi, 1999; Giuliani et al, 2005; Pietrobelli
and Rabellotti, 2011). However, the impact of such inter-firms relationships on the possibilities for
firms based in developing economies to learn and develop autonomous innovation capabilities is
still controversial and rather understudied.
Based on a review of the existing empirical literature, in this paper we aim at investigating how
relevant are different learning channels, internal and external to the Global Value Chains, in terms
of development of indigenous innovation capabilities in the firms involved in GVCs. We seek to
reconcile GVC and innovation frameworks reviewing empirical studies that have so far focused on
innovation processes in GVCs to investigate whether there is evidence of innovation occurring at
the local level when firms participate in GVCs and, if so, to understand what have been the main
channels through which innovation has been accomplished. We focus on developing economies,
where the building up of a local innovation base is a policy object of utmost importance and where
the participation in GVCs has traditionally played the largest role.
As a matter of facts, in the GVC literature there is a general positive expectation that firms in
developing countries through their participation in GVCs can access key information about the type
and quality of products demanded by consumers in global markets as well as valuable knowledge
needed to compete in global end-markets (Gereffi, 1999; Sturgeon et al, 2008). Moreover, the GVC
literature suggests that the increase in the local capabilities to introduce new products or processes
or perform more complex tasks largely depends on the governance patterns and the power relations
ruling the connection between local firms and GVC lead firms (Gereffi et al, 2005; Giuliani et al.,
It has also been noticed that in firms involved in GVCs innovation may not depend exclusively on
GVC characteristics and on the role of lead firms, but it may as well depend, among other things, on
local firms’ technological capabilities (Morrison et al., 2008), and on the quality of the national
and/or regional innovation systems (Pietrobelli and Rabellotti, 2007; 2011).
To investigate different learning mechanisms, we have conducted a literature review that lead to the
identification of 50 GVC cases in which we have codified information on a) innovation taking place
at the local level and b) on learning sources within GVCs as well as internal to the firms and
external from non-GVC actors. By the mean of clustering techniques, we have developed a novel
typology of local innovators within GVC – being representative of different industries and local
contexts which support the discussion about the relevance of GVC participation as a channel to
develop indigenous innovation capabilities and its interplay with other learning channels.
The paper is structured as follows. In the next section we present the methodology of the literature
survey and provide details about how information has been searched and codified in the different
GVC cases taken into account in the analysis. Section 3 gives an overview about the various forms
of local innovation encountered in the cases under scrutiny. Section 4 describes the main learning
mechanisms at the basis of the local innovation processes, proposing a taxonomy of learning
mechanisms within and outside the GVC. Section 5 presents the results of the cluster analysis
introducing the GVC typology. Section 6 concludes providing some policy implications.
The paper is based on a review of the existing literature about innovation in GVC in developing
countries. Our research strategy has consisted in searching relevant studies in peer-reviewed
journals in the Scopus database 1 and in non-academic literature, including relevant books and
reports by international organizations involved in GVC studies, namely the World Bank, World
Trade Organization (WTO), United Nations Industrial Development Organization (UNIDO), United
Nations Conference on Trade and Development (UNCTAD), Organization for Economic
1 Some additional papers have been added on the basis of the list of references of the selected articles.
Cooperation and Development (OECD), United Nations Economic Commission for Latin America
and the Caribbean (UN-CEPAL), Inter-American Development Bank (IADB) (Werner et al, 2014).
In our search we have considered as a starting year 2005 when the literature on GVC has gained the
critical mass of 50 publications per year. In Scopus, we have searched for studies with Global
Value Chainand developing countries 2 in the title, abstract or among the keywords (Table A.1
in the Appendix reports the word clouds used to search for both terms). Following these criteria, we
have identified 171 articles (all written in English) and then, by reading their abstracts (and the
papers when needed), we have eliminated all the articles not focusing on developing countries (18)
and those without an empirical content (48). Then, we have undertaken a further selection
identifying those papers providing some information about innovation, including processes of
catching up, upgrading, technological spillover, new product development and the like and learning.
Indeed, considering that innovation is not uniquely defined in the literature or may not be explicitly
mentioned, we have manually screened all the abstracts and the papers, rather than relying on an
automatic search based on keywords. After this final step in the selection process, we have
remained with 31 papers, which have been used for the quantitative analysis. In these selected
papers, we have found information about 50 GVC cases (listed in Table A-2 in the Appendix)
included in our analysis.3
For each GVC case, we have codified the following dimensions:
Type (product, process, organizational and market-related innovation) and degree (new to
the world, new to the country and new to the firm) 4 of innovation introduced by the local
Learning mechanisms distinguishing between those within and outside the GVC.
2 As defined by the World Bank the list of developing countries is available at
3 There are a few GVC cases that are analyzed in more than one paper (e.g., Automotive in China, Software in India,
Electronics in Indonesia and China). We have considered them as different GVCs because the papers are focused on
different segments of the chain. For example in the case of automotive, the paper by Hatani (2009) focuses on the sub
chain of Chinese firms involved in the Japanese GVC while Altenburg et al (2008) more generally investigate the
Chinese auto industry. Similarly, in the electronics case the paper by Sturgeon and Kawakami (2012) studies the
Taiwanese GVC and Altenburg et al (2008) maintain a more general approach. These differences justify the different
cluster classification in some of these cases.
4 We acknowledge that there are different, more sophisticated ways to analyse and measure innovation in developing
countries (see Bell and Pavitt, 1993). However, we align here to the very simple, but widely accepted, definition of
innovation contained in the Oslo Manual, as creation or adoption of new product or process and new organizational and
marketing practices, where “new” means new to the world, to the country or to the firm. We are aware that this
classification is extremely simplified and it does not account for the level of sophistication introduced in each type of
innovative activity.
Information about the characteristics of the lead firms (size, sector of specialization, country of
origin), the governance patterns in the GVC and the actors involved in the local innovation systems
have also been collected and used to complement the two main dimensions of analysis.
All the codified information has been quantified using Likert scales or being assigned a 0 (when the
condition was absent) or 1 (when present). In reviewing the documents about the GVC cases, we
have tried to minimize the occurrence of biases and misinterpretations, complementing and cross-
referencing information in all possible ways e.g. by consulting other related materials and grey
In our reading of the literature we have found very heterogeneous patterns of innovation among
GVC firms located in developing countries. In most cases, we have observed evidence of product
innovation (in 41 GVCs, corresponding to 82 per cent of the GVCs analysed). Process innovation is
also rather widespread, being reported in 31 cases: the improvement of process quality and
efficiency is observed respectively in 55 per cent and 52 per cent of the cases, sometimes achieved
through the adoption of international standards linked to certifications (observed in 23 per cent of
the process innovators). Organizational innovations are reported in 21 cases (42 per cent) and
regard mostly the introduction of lean manufacturing practices and the modification of
organizational practices, often according to the standards required by international certification
schemes. Interestingly, there are also cases of market-related innovations (30 per cent), which
typically refers to the introduction of own brands and new product lines (e.g. Chaminade and Vang,
2008; Sturgeon and Kawakami, 2011; Goto, 2012), while in fewer cases it concerns distribution
(e.g. Barnard and Tuomi, 2008) and packaging innovations (Ponte and Ewert, 2009; Matthee et al.,
2006; Padmanand and Kurian, 2011).
While this evidence suggests that developing country firms involved in GVCs display some degree
of innovativeness, it does not tell much about the level of innovativeness of these firms. Our review
evidences that 40 per cent of product innovations is described as “new to the world” innovations
with some having been granted international patents, as substantiated by studies on GVCs in the
electronics industry in China (Sun et al., 2013; Dennis Wei et al, 2011), which in some case are
hold by affiliates to multinationals (Athukorala, 2014). We do also find examples of new to the
world innovations in traditional industries. In the case of football manufacturing, Nadvi (2011)
reports how a Taiwanese-owned company based in Dongguan, China, has patented in the mid-
1990s a machine to stitch high quality footballs, which subsequently boosted Chinese productivity
and pushed Pakistani hand-stitching traditional firms out of the market, shifting the export
leadership in the football market from Pakistan to China. In the context of coffee production in
Brazil, Cafaggi et al. (2012) describe another example of a new to the world innovation represented
by the development of new varieties of coffee through genetic research, realized via a joint-venture
among local companies and the lead firm, the Italian Illycaffé. As supported by Lema et al. (2015),
vanguard firms in developing countries are no more 'adapting' innovation coming from the old
power but increasingly providing themselves solutions that are lately adopted in global markets.
Our review has also identified several cases of indigenous innovation occurring in the process of
adaptation of international technologies to the needs of the local market leading to a new product
concept. Brandt and Thun (2011) provide a clear example in the context of the mobile handset value
chain (VC) in China, suggesting that the success of the Chinese-based OEM products depends on
the introduction of a new distribution systems (reaching customers in the rural areas through the
establishment of commercial subsidiaries) and the development of a flat organizational structure,
allowing very quick response to changes in the domestic demand and a deep knowledge on local
customers needs. Such innovations may regard not just an original design but also original
functions, as emerged from the interviews among Indonesian electronics entrepreneurs undertaken
by Kadarusman (2012). A case point is the development of a special TV antenna system adapted to
the local conditions of weak transmitters. Even tough such innovations might not entail a large
technological content – being more a novel combination of existing technologies or a new business
model – they entail a large market potential for indigenous firms, in that they can build their
competitive advantage addressing such market niches for which multinationals are not willing to
invest to adapt their product either because they are too small or because MNEs are not able to
sense and seize their potential. Similar examples of indigenous innovations, which addressed needs
of local niches 'forgotten' by developed countries firms, are reported by Williamson (2015)
including the gaming technology developed by Tencent (China) to overcome the problem of
counterfeiting in the emerging economies market, or the innovative business model for mobile
phone access introduced by Bharti Airtel (India), which tackled low-income consumers of inner
rural regions. While they might be initially developed for local markets, such innovations can get
global in a second stage, as exemplified by the flex-fuelling system for passenger cars developed by
the Brazilian subsidiary of Bosch described in Lema et al. (2015)
In this section we discuss the main channels through which firms at the developing country end of
the GVC learn and access knowledge to innovate. In a bid to explore more directly the learning
mechanisms taking place in GVCs, Pietrobelli and Rabellotti (2011) have identified different
mechanisms that may take place within the chain, listed in the upper part of Table 1. In addition to
them, based on our review of the literature we suggest to consider other learning mechanisms
outside the GVC, working at the firm level, at the cluster level or through other external channels.
In Table 1 we propose taxonomy of learning mechanisms, presenting also their frequency in our
Table 1: Learning mechanisms within and outside the GVCs
# of
Within the
1) Mutual learning from face-to-face interactions
2) Training of local workforce by GVC lead companies
3) Knowledge transfer from the GVC lead firms confined to a
narrow range of tasks
4) GVC pressure to adopt international standards
Total # of cases*
Outside GVC
Firm level
1) Internal R&D effort
2) Hiring of skilled managers and workers
3) Learning trough firms' acquisition/joint ventures/licensing
Collective level
4) Learning within firms at the local (cluster or regional) level
Other external
5) Learning from suppliers (non GVC related), universities,
service providers
6) Imitation from competitors
Total # of cases*
*Multiple classifications are possible
Learning mechanisms within the GVC
In our analysis we consider the following learning mechanisms within the GVC: a) mutual learning
from face-to-face interactions; b) training of local workforce undertaken by the lead companies; c)
knowledge transfer from the GVC lead firms confined to a narrow range of tasks; d) GVC pressure
to adopt international standards. As reported in Table 1, in 84 per cent of the GVC analysed at least
one of these mechanisms has supported innovation.
Mutual learning from face-to-face interactions
It is common when there are complex and not fully codified transactions and when firms involved
in GVCs and lead companies possess highly complementary competences. Our literature review
suggests that in some cases the lead firm and its suppliers hold very tight relationships. For
instance, Meléndez and Uribe (2012) describe the case of some Colombian suppliers of chilli
pepper paste regularly receiving technical assistance aimed at checking their agronomic techniques
and supporting the introduction of technological innovations by Tabasco, the lead company of their
GVC. Very close relationships between the lead company and the suppliers are also behind the
quality improvement of coffee in Brazil (Cafaggi et al., 2012). Illycaffé, the GVC lead company
provides constant technical assistance in quality management and control as well as in packaging
and transportation, ensuring the high quality of the coffee from the first to the final actor in the
chain. In order to stimulate the production of high-quality coffee and identify the best producers,
Illycaffé has also promoted a coffee competition, offering a price differential to reward quality.
Another interesting initiative promoted by Illycaffé is the establishment of a club offering benefits
to its members, such as more intensive technical assistance, establishing a closer relationship
between the lead company and an selected group of suppliers.
Training of local workforce by GVC lead companies
This learning mechanism occurs most likely when the lead firm takes direct ownership of some
operations in the chain, establishing local subsidiaries. We have found evidence in the electronics
industry in countries as diverse as Mexico (Sturgeon and Kawakami, 2011), Malaysia (Athukorala,
2014) and Indonesia (Kadarusman, 2012). In this latter case, the local workforce learns from the
contact with the expatriates, who are placed in key management positions in foreign affiliates. The
local staffs are also often sent to the training and production facilities of the lead firm, e.g. in Japan,
to learn about production activities. The nature of the relationship between the local supplier and
the GVC lead firm, so as its willingness to transfer technology are particularly relevant important
for such technology transfers to take effectively place (Khan et al., 2015), a reflection that holds
also for mutual learning and face-to-face interactions.
Knowledge transfer from the GVC lead firms confined to a narrow range of tasks
This is the most common among the learning mechanism within the GVC in our literature review
and it is diffused when suppliers lack competences and therefore the lead companies provide them
with support for avoiding the risk of non-compliance. It often regards the transfer of knowledge on
the process and on how to manage the organization rather than on the products. The support is
usually confined to a narrow range of tasks for example, simple assembly with a risk for the
local suppliers to be locked in basic technologies and skills and therefore being unable to develop
other strategic capabilities. This is the case of the shoe industry in the Sinos Valley in Brazil where
the US buyers have supported the domestic producers for improving the quality of their products
and increasing their efficiency, but they have discouraged them from engaging in design, marketing
and sales because these are their core competences (Navas-Aleman, 2011). Therefore, being
confined in the manufacturing phase the Brazilian suppliers have remained highly dependent on a
small number of powerful customers keen to maintain the status quo in the GVC.
GVC pressure to adopt international standards
This is common when GVC local suppliers are skilled and fully competent, or when their product is
a commodity and the lead firms require them to adjust to specific technical and quality standards
(e.g. ISO certifications) and to take full responsibility of the technological process, without
engaging in transferring the needed knowledge. In these cases, lead firms do not become directly
involved in the learning process. The involvement in the GVC and the need to adhere to standards
is important for inducing learning and innovation at the local level and the role played by the lead
firms is to impose pressure on their suppliers for innovating and keeping abreast of technological
advancements. In other words, the lead firms represent a crucial stimulus for inducing learning and
innovation among suppliers, but they are simply spectators and final judges of the process.
Confirming Pietrobelli and Rabellotti (2011), our literature review suggests that this stimulus for
learning is very common in complex products (Giuliani et al., 2005), including electronics
(Sturgeon and Kawakami, 2011; Kadarusman, 2012), mobile phone (Brandt and Thun, 2011), wind
turbine industry (Lema, 2013) and aeronautics (Cafaggi et al, 2011). In these chains, local firms
need to undertake specific investments, build specialized production capabilities and constantly
update in order to maintain their position in the GVC. Their learning efforts must be accomplished
autonomously, or with the support from external consultancies and accredited institutions, since
they are not supported by a direct involvement of the GVC leaders. .
The compliance to standards as a condition to be involved in GVC is also common in chains
specialized in export-oriented agro-industry such as, e.g. the production of vegetables in Guatemala
(Padilla-Perez, 2014). Exporting firms have to fulfil requirements on health controls, rules of origin,
and trade standards and buyers require certifications of good agricultural practices (GAPs) and good
manufacturing practices (GMPs), as a guarantee that the product has the quality demanded by
consumers. Also in this case, buyers are not directly involved in the process of quality upgrading,
but the necessity to satisfy international standards create the right incentives for local suppliers to
focus on quality.
Learning mechanisms outside the GVC
These mechanisms are classified in three categories: a) firm-level learning efforts; b) collective
learning efforts at the local level; c) other external learning efforts unrelated to the GVC.
Firm-level learning efforts
Internal, firm-level effort to developed innovation capabilities is the most diffuse channel outside
the GVC through which firms acquire innovation capabilities, occurring in more than half of the
cases (see Table 1). This can take different forms.
Firstly, firm can innovate by developing internal R&D capabilities. In an econometric study on
China’s ICT industry, Sun et al (2011) find that the impact of GVCs on local technological
innovation depends on local suppliers’ absorptive capacity. According to these empirical findings,
internal R&D efforts are the most important source of innovation for firms in China and the
involvement in GVC per se does not boost firms’ innovation capacity: The process is mediated by
the internal R&D efforts and absorptive capabilities and only in firms with strong internal R&D did
subcontracting show positive impacts on firm innovation(Sun et al, 2011: 1782) – a result that is
coherent with other studies looking at the impact of FDI on host countries (see e.g. Giuliani and
Macchi, 2014). Also the contribution of skilled workers is a relevant learning mechanism in the
innovation process as empirically confirmed by Fu et al (2014) in their survey on Ghana. They have
found that more than one third of process innovations have been produced by skilled workers, who
were able – via trial and error – to make considerable improvements in the production processes
The recruitment of skilled personnel, often having a previous working experience within MNEs, is
a second firm-level mechanism, which has been indicated in many cases. In the case of the
electronics industry in Malaysia (Athukorala, 2014) and Indonesia (Kadarusdam, 2012), it emerges
as a key channel. In both cases, there is evidence of former employees of lead firms having
established new local firms (spin-offs), as well as domestic-owned companies having acquired
knowledge and expertise key in the innovation process through hiring professionals with previous
experience in the GVC lead companies. Yang (2014) discusses the case of the LCD industry in
Shenzen (China) and concludes that the indigenous innovation capacity of domestic firms has
benefitted widely from the recruitment of a group of senior managers previously employed by lead
companies in the flat-panel display GVC working in the cluster. The inclusions of academicals as
founders or affiliated to the companies (what is sometimes called 'forward engineering') is another
form in which this learning mechanisms can take place, which has been described for high-tech
industries in China (Lee et al. 2011; Cheong et al. 2016)
Thirdly, some firms have acquired knowledge linking up with GVCs by means of the acquisition of
other companies, joint ventures or other equity-agreements, often engaging Western counterparts.
Even tough it has been cited the less, within our cases (just in 20 per cent of the GVC analysed), it
is presented as the most important channel for the acquisition of higher level knowledge (both about
technology and markets) and eventually innovation development so as of brand recognition. As
supported by Williamson (2015) merger and acquisitions have been particularly attractive for
MNEs based in China and in other developing countries, to accelerate the development of their
innovation capabilities, and might represent the initial step of a catch-up strategy especially for
younger and more inexperienced companies (Cheong et al, 2016). In the case of the Chinese mobile
telecom sector, Brandt and Thun (2011) present examples of the establishment of joint ventures
with foreign firms in which both sides benefit from the partnerships: the Chinese firms gain access
to the designs and technology they did not possess while the foreign firms get into the Chinese
market. Another example of joint ventures can be found in the case of the pharmaceutical GVC
specialized in anti-retroviral treatments for HIV in Uganda. Haakonsson (2009) provides evidence
of JVs as a way for domestic companies to gain access to knowledge and technology and for Indian
MNEs to enter into the Ugandan market, which has otherwise become difficult for the adoption of
intellectual property TRIPS-compliant laws.
Collective learning at the local level
In 24 per cent of the GVCs analysed, learning take place through the interactions with other firms,
which are part of the same cluster or region, a spatial dimension that prior research has proved
relevant to explain firms innovation and upgrading (among others, Giuliani et al., 2005).
In clusters, critical actors are often local business associations, which sometimes provide local firms
with the technical know-how required to meet international standards. This has been illustrated in
the case of the Sialkot cluster (Pakistan) specialized in surgical instruments investigated in Nadvi
and Halder (2005), where the local business association has provided support and facilitated the
cluster-wide adoption of ISO 9000 standards. Along the same line, De Castro Souza and Neto
(2010) stress the key role of the local associations in supporting technical advancements in the
production of fresh fruits in Brazil. In the Petrolina-Jazueiro cluster, a cooperative of producers has
played a key role in spreading the production techniques needed for satisfying international
certifications, offering to its members training courses and on field technical assistance (De Castro
Souza and Neto, 2010). This experience shows the importance of collective action and cooperation
among producers for guaranteeing a common quality standard.
Firms do also sometimes rely on cluster-level associations to gather information that is context and
sector specific for innovation. This is a finding of the survey undertaken by Fu et al. (2014) in
Ghana, highlighting the role of clusters in fostering innovation and technological transfers, through
knowledge spillover and labour market pooling. In the Sinos Valley footwear cluster in Brazil,
Navas-Aleman (2011) stresses the key role played by the local business associations in supporting
the development and the diffusion of knowledge in design and product development, which has
been crucial in facilitating the success of local firms in accessing the domestic and regional
Other external channels unrelated to the GVC
We have included in this category all the cases of learning from partners that are not vertically
related to the focal firms – i.e. they are not GVC partners – including firms specialized in the same
step of the value chain (competitors), suppliers of machineries or knowledge providers such as
universities and consultancies agencies.
One way in which suppliers learn from competitors is through the well known mechanism of
reverse engineering - a common practice reported in the case of automotive GVCs in China and
India (Altenburg et al, 2008) and in the electronics GVC in Indonesia (Kadarusman, 2012). In the
latter case, domestic firms commonly purchase product samples to dismantle and innovate upon
them (e.g. develop new design and functions, adapting products to the specificity of their
destination markets, etc.). As described by Kadarusman and Nadvi (2013), this is also a diffused
practice in the Indonesian clothing industry. The local firms often visit department stores abroad
and purchase garment samples for adapting them to the domestic and emerging export markets.
Firms also regularly send their designers and engineers to domestic and foreign exhibitions for
obtaining information about new product and process advances.
Other firms acquire knowledge and manufacturing know-how by purchasing equipment from global
suppliers and obtaining technical support from them. This is reported in the wind energy industry in
China by Lema et al. (2013), who describe the role played by European suppliers having established
subsidiaries in China, which provide specialized components and services in fields such as electric
control systems and hydraulics, as well as technical assistance to Chinese turbine manufacturers.
To improve product, quality and production efficiency, Indonesian electronics firms have obtained
support also from universities or consultancy agencies. For instance most of the domestic firms
have adopted standards applied in the global market by achieving international certifications (e.g.
ISO 9000) with the support from consultancies and accredited certification institutions
(Kadarusman, 2012).
To aggregate and analyse the information collected about innovations and learning mechanisms in
the selected GVC cases, we have performed a k-means and hierarchical cluster analysis, identifying
possible groupings based on the following key dimensions:
(i) Degree of innovativeness: with a count variable ranging from 0 to 5, summing one for
each innovation introduced (i.e. product, process, organizational and market) and adding
a bonus equal to one when product innovation is classified as new to the world;
(ii) Learning mechanisms within the GVC: summing the number of the GVC channels used
by the firm, based on the four ones listed in Table 1;
(iii) Learning mechanisms outside-GVC: summing the number of the GVC channels used by
the firm based ,on the remaining 6 channels in the same table.
The cluster analysis has identified three main groups of GVCs, as summarized in Table 2:
GVC-based innovators (9 GVCs) including highly innovative local firms intensively using
within-GVC learning mechanisms;
Self-reliant innovators (14 GVCs) also comprising highly innovative firms, but whose
learning sources mainly come from outside the GVC;
Modest innovators (27 GVCs) containing low to moderate innovative firms, which draw on
some of the knowledge sources available within the GVC, while poorly using other sources
of learning.
In the rest of this section, we describe each group in more details, considering for their innovation
capacity and their learning mechanisms.
Table 2: A Typology of GVCs
GVC-based Innovators
Self-reliant Innovators
Modest Innovators
Within GVC
Intensive use:
Transfer of knowledge on
narrow tasks
Standard pressure
Selected use:
Knowledge transfer on
narrow tasks
Limited use:
Transfer of knowledge
on narrow tasks
Standard pressure
Outside GVC
Selected use:
Internal R&D
Collective learning
Intensive use:
Internal R&D
Hiring skilled employees
Very limited use
GVC-based Innovators are characterized by high innovativeness and by the use of all possible
learning channels from within the GVC, and, particularly, they benefit from face-to-face
interactions and training of local personnel supported by the lead firms. In some cases, innovation is
induced also by the need to comply with the strict production standards imposed by the lead firms,
which are often achieved thanks to extra-GVC learning. GVC-learning is not done in a vacuum and
in the majority of these GVCs, innovation activities at the firm level are also performed benefiting
from connections with other local non-GVC actors (such as suppliers, universities or business
associations) as well as from the imitation of nearby actors. GVC-based Innovators are therefore
local firms that benefit both from being part of a GVC, as well as from being often embedded in
well-developed local innovation systems.5 This also explains why connections to, and imitation of,
other local actors is stressed by this kind of firms. The (selective) role of firm-level learning efforts
should be considered supportive for the possibility to absorb and leverage GVC knowledge, in line
with the evidence by Fransen and Helmsing (2016) that, studying handicraft exporters in Indonesia,
highlight that absorptive capacity mediates the GVC knowledge on firms' innovation capabilities.
An illustrative case of this group is the coffee GVC in Brazil described by Cafaggi et al (2012) and
characterized by a virtuous learning system in which the main lead firm, Illycaffé, has played a key
role together with some local business associations, the universities as well as an intense innovative
effort undertaken by the same local producers. Through the supply of concrete incentives and direct
technical assistance, Illycaffé has directly supported the introduction of process and product
innovations needed for entering in the high quality coffee global market. The business associations
(such as the Brazilian Specialty Coffee Association GSCA and the Council of Coffee growers’
Associations of the Cerrado region – CACCER) have also sustained the local innovative effort,
providing technical training and knowledge transfer, developing joint marketing initiatives and
promoting scientific research programs in partnership with local research institutions. Supported by
a favourable local innovation system and stimulated by their involvement in the GVC, local firms
have invested in innovation as it is exemplified by the case of Daterra, a local company, which
began as an exclusive supplier for Illycaffé and thanks to its many investments in the creation of its
own laboratory of quality analysis and the development of a traceability system to map the quality it
has more recently established its own chain in the global market, now selling only a small amount
of its total production to the Italian company.
Self-reliant Innovators use the GVC as a source of learning only to a limited extent, as merely about
a third of them either receives knowledge from the lead firm (but this knowledge is mainly confined
to a narrow range of tasks), or has some face-to-face interactions with the managers in the lead firm
(or both). These innovative firms do not exploit other GVC learning channels, while they almost
entirely use internal R&D to sustain their innovative efforts. About half of them, moreover, acquire
knowledge from hiring skilled employees (in most cases being returnees or expats) and through
5 In 37 GVCs we have collected information about the level of development of the local innovation system (IS) considering the role
played by different potential actors such as universities, knowledge business service providers, public agencies and metrology and
standard organizations. In more than 80% of GVC innovators, the IS is classified as medium to strong.
other equity-agreements (acquisitions, JVs, licensing). Interestingly, in many cases these modalities
have been highlighted as the most relevant, since they have enabled rapid and effective innovation.
The development of the Chinese wind turbine industry described by Lema et al. (2013) exemplifies
the case of these GVCs. Initially, the rise of the Chinese wind industry has been driven by the
development of a domestic market and the technology was entirely imported from European
producers, which established local subsidiaries of turbine manufacturers. The option of tapping into
the established design and engineering capabilities of overseas firms buying licenses from European
companies has been key to the Chinese success story. More recently, Chinese wind companies have
started to invest in large R&D departments in China as well as in Denmark and Germany, the two
technological lead countries in the industry. Lema et al. (2013) and Lema (2012) show that Chinese
turbine manufacturers have adopted an innovation strategy that combine internal R&D effort with
heavy reliance on external knowledge sourcing by means of the acquisition of licenses or the
establishment of joint ventures or acquisitions in Europe.
Self-reliant Innovators do not use local learning sources - such as imitation and interactions with
other local actors - as much as GVC-based Innovators. We explain this difference by the fact that,
in about half of the observed cases, Self-reliant Innovators operate in local innovation systems that
are described as being weak. It is therefore possible that this lack of local learning is tied to the fact
that the local context is too weak to provide firms with valuable knowledge assets.
Modest Innovators include firms that have either introduced few types of innovation, usually
process or organizational, or introduced product innovation being just new to the firm. They do not
perform in-house R&D and barely use any local source of learning for their local innovation
systems are generally very weak. Moreover, these firms count on GVC knowledge only to a limited
extent given that only about a third of them are involved in some forms of GVC learning
mechanisms. Evidence of this kind is in line with the absorptive capacity interpretative framework,
which suggests that firms characterized by weak technological capabilities are unlikely to establish
knowledge-rich connections and remain somehow locked-out of the relevant innovative circles
(Cohen and Levinthal, 1990; Giuliani and Bell, 2005; Giuliani, 2013).
Among the numerous cases characterized by weak innovation, there is the clothing industry in
Kenya and Madagascar described by Kaplinski and Wamae (2010), who stress that local firms have
received some technical assistance from buyers, but this has not ended up in much product and
process innovation and that in particular Kenyan companies have remained locked into GVC
serving the US market in the high volume commodity segment. An interesting conclusion of this
study is that those companies from Madagascar involved in GVCs targeting the European or the
South African markets, show greater evidence of process and product upgrading and this is
explained by some different characteristics of the final market of destination, such as production of
small batches requiring more flexibility and thus enhancing process innovation capabilities and
greater design independence.
All in all, more than half of the cases analysed falls into the group of the Modest GVC Innovators
(54 per cent), while a third (28 per cent) are Self-reliant Innovators and only one fifth of the cases
(18 per cent) fall in the group of GVC-based innovators. Being the cluster analysis based on the
empirical evidence collected in studies on GVCs with some attention to innovation, these results are
surprising in many ways. First, we would have expected a more relevant role played by GVC lead
companies in local innovation and instead, we observe more cases of GVCs where local innovative
firms draw their knowledge resources from sources outside the GVC, particularly from their
internal capability building processes. This means that the GVC may, under certain circumstances,
be the loci of innovation, but the presence of alternative, extra-GVC learning processes at the local
level seems to be a fundamental condition for local innovation to take place. Second, in the
narratives and codification of the cases we do find that, indeed, innovation is not to be taken for
granted, as most of our cases score poorly in that respect. Hence, in spite of the fact that innovative
processes do occur also in developing countries’ firms, about half of the observed firms do still
underperform in that respect, even if they are part of a GVC.
6. Concluding remarks
Over the past two decades, analyses on GVCs and their repercussions on developing countries have
grown considerably, attracting the attention of the academic and practitioner community (Gereffi
and Lee, 2012; Werner et al, 2014). In spite of this planetary success, it is still debatable to what
extent, and under what conditions, in developing countries local firms that are part of GVCs may
benefit from them in terms of their capacity to autonomously innovate.
Development scholars demonstrate a fairly positive expectation about the capacity of GVCs to
produce different kinds of innovation at the level of local firms in developing countries, but
evidence on this is sobering. As noted in Morrison et al. (2008) and Nadvi (2011), the GVC
literature has only poorly conceptualized firm-level processes of technological capability
accumulation and learning, although the empirical evidence provides rich insights about how firms,
clusters and regions learn and innovate through their involvement in GVCs, overlooking the wide
heterogeneity existing at the local level. Local suppliers are different in terms of their capacity to
absorb, master, and adapt knowledge and capabilities that lead firms in GVCs can potentially
transfer to them, in terms of their openness to sources of knowledge other than the GVCs, and their
embeddedness in more or less advanced and mature local innovations systems.
In this analysis we have investigated how innovation takes place in GVCs by adopting a framework
that reconcile development research on GVCs (Gereffi, 1999; Humphrey and Schmitz, 2002) with
innovation studies and evolutionary economics on firm level learning and innovation (Nelson and
Winter, 1982; Dosi, 1988; Bell and Pavitt, 1993), in line with what suggested by Morrison et al.
(2008) and Rabellotti and Pietrobelli (2011). In particular, this paper makes an effort to read GVC
studies in the context of developing countries searching for the empirical evidence available on
local firms’ learning and innovative behaviours in a bid to analyse the relevance of these
dimensions to explain the impact of GVCs on local firms’ innovation processes. By the mean of a
meta-analysis on existing empirical contributions, we first identify a taxonomy of learning
mechanisms used by local companies to innovate, including outside-GVC learning –firm-level,
collective-level and other external – as well as within-GVC learning mechanisms. Following, based
on a cluster analysis we have identified three types of local firms innovators in GVCs, based on
their innovativeness capabilities and on the learning mechanisms used: a) GVC-based Innovators,
b) Self-reliant Innovators c) Modest Innovators.
Our review sets the ground for a number of original considerations. First, we observe that suppliers
located in developing countries, in spite of being part of one or more GVCs, do not always use the
GVC – i.e. their connections to different GVC members among which the lead firms – as a
privileged source of knowledge and technologies. Quite on the contrary, only in a minority of our
observed cases we do find such an exclusive relationship to exist and in such cases, as illustrated by
the case of GVC-based Innovators, these firms do also invest in considerable capability building to
be able to innovate.
In most of the other observed cases, GVC related knowledge is instead exploited only as a
complementary source to other channels of knowledge (e.g. collective learning at the local level,
imitation, learning from other non-GVC actors), which are reported as being the most effective. The
case of Self-reliant Innovators (roughly about a third of the observed evidence) is illustrative here,
as these GVCs are characterized by innovators that draw their knowledge mainly from sources
outside the GVC, which probably reflects the fact that GVC knowledge may be too narrow or
specialized and that – as innovation scholars have pointed out in several occasions (Larsen and
Salter, 2009) – a certain degree of knowledge variety is needed to be innovative.
Second, and probably most revealing, about half of our empirical observations are GVCs where
innovation is hardly taking place, a condition that tend to coexist with local firms’ relative closure
to both GVC-related and other kinds of knowledge sources, as well as with local firms’ poor skills
and knowledge creation efforts. We have observed this behaviour through what we have called
Modest Innovators. This evidence, combined with observations of GVC-based and Self-reliant
Innovators, prompt us to speculate about the importance of local heterogeneity – both at the level of
firms, as well as of the whole cluster, regional or even national system of innovation – in
conditioning the extent to which suppliers in developing countries are able to take advantage of
GVC-related knowledge.
In terms of contributions to scholarship, this paper consolidates earlier studies calling for
integration between GVC and innovation studies (e.g. Giuliani et al., 2005; Morrison et al. 2008;
Rabellotti and Pietrobelli, 2011). It therefore calls for more empirical research to include issues of
inter-firm learning and innovation heterogeneity at level of firms, clusters, innovation systems that
are at the Southern-end of the GVCs.
Furthermore, our analysis supported that, in the context of developing countries, the literature of
innovation in GVCs is barely linked with the wide literature looking at the social and environmental
upgrading possibilities (Barrientos et al. 2011; Giuliani and Macchi, 2014), as it is starting to take
place in the developed country context (De Marchi et al., 2014), if not for few notable exceptions
(e.g., Ivarsson and Alvstam, 2011) in which the narrative suggest that environmental and social
improvements have been achieved by adopting (incremental) technological innovations, often
suggested by the global lead firm. We envisage research on such kinds of impacts will soar in the
next few years, given the urge scholars and practitioners have to address the sustainable
development ‘grand challenge’. Finally, most of the available empirical evidence focuses on GVCs
that are led by large corporations (either buyers or manufacturers) from advanced countries (i.e. the
North) sourcing from suppliers in developing countries (the South). Little research is on South-
South GVCs, and South-North GVCs received far less consideration – while we know this is a
growing phenomenon with relevant implication for local innovation and (economic, social and
environmental) upgrading outcomes (Kaplinsky et al., 2011). We therefore encourage more
research along these lines.
In terms of policy implications, it is clear that integration in GVCs should not be seen as a panacea
for promoting innovation in developing countries but as a window of opportunity that can have
development effects. GVC interventions are widespread among international organizations and
donors (Pietrobelli and Staritz, 2013) because they offer a practical way of working with the private
sector. Humprey and Navas Aleman (2010) identify three main objectives of GVC initiatives: a) to
strengthen the weakest links in the chain (e.g. by improving the capabilities of local small suppliers)
b) to strengthen the linkages between firms (e.g. by improving knowledge flows between the local
firms and the lead firms) and c) to create new links in the chain for connecting local firms with new
lead firms and/or end markets. Our survey of the GVC literature shows that these three areas of
interventions are all potentially relevant in terms of enhancing local innovation opportunities.
Nonetheless, there is no systematic assessment of the impact in terms of innovation of the existing
GVCs initiatives. More evaluation studies in that direction would be therefore a welcome effort to
be undertaken by the numerous organizations and donors involved.
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Table A.1: Keywords used in the SCOPUS search*
Global Value Chains
Global Value Chain*;Global Production Network*; Global supply chain*;
export processing zones
Developing countries
Developing countr*;developing econom*; developing market*; emerging
countr*; emerging econom*; emerging market*; third world; BRICS; Global
South; transition countr*; transition econom*; transition market*; rising
power*; least developed countr*; least developed econom*; least developed
* Combined with Boolean operators
Table A-2 The GVCs cases
Complex products manufacturing
Cafaggi et al. (2012)
Kumar & Subrahmanya (2010)
Krishna et al. (2014)
Altenburg et al. (2008)
Hatani (2009)!
McDermott & Corredoira (2010)
Kumaraswamy et al. (2012)
Sturgeon & Kawakami (2011)
Altenburg et al. (2008)
Dennis Wei et al. (2011!)
Krishna et al. (2012)
Kadarusman (2012)
Kadarusman & Khalid (2013)
Athukorala (2014)
Sturgeon & Kawakami (2012)
Brandt & Thun (2011)
Sun et al. (2013)
LCD Screens
Yang (2014)
Yang & Liao (2010)
Krishna et al. (2012)
Haakonsson (2009)
Space Industry
Altenburg et al. (2008)
Wind Turbine
Lema et al. (2013)
Traditional manufacturing
Fu et al. (2014)
Diamond Cutting
Mbayi (2011)
Food processing
Meléndez & Uribe (2012)
Food Processing
Fu et al. (2014)
Nadvi (2011)
Nadvi (2011)
Navas-Aleman, (2012)
Tencati et al. (2008)
Navas-Aleman, (2011)
Kadarusman & Khalid (2013)
Kaplinsky & Wamae (2010)
Kaplinsky & Wamae (2011)
Goto (2012)
Garment and Textile
Fu et al. (2014)
Surgical Instrument
Nadvi & Halder (2005)
Padmanand & Kurian (2014)
Cafaggi et al. (2012)
Matthee et al. (2006)
Fresh Fruits
de Castro Souza & Neto (2010)
Tencati et al. (2010)
Padilla-Perez (2014)
Ponte & Ewert (2009)
Kaplinsky et al. (2011)
Kaplinsky et al. (2011)
Barnard & Tuomi (2008)
Altenburg et al. (2008)
Chaminade & Vang (2008)!
Legenda: MI: Modest Innovators, SRI: Self-reliant Innovators, GVCI: GVC Innovators
Table A-3 GVC groups
within the
outside the
GVC Innovators
Self Reliant Innovators
Modest Innovators
... Despite the importance of global supply and value chains, several research gaps remain (Blanchard et al. 2016;Kano et al. 2020;Marslev et al. 2022). There is a lag in understanding innovation development (in global value chains) in emerging nations; this could be primarily due to an imbalance in (often technological) capabilities, absorptive capacity, and knowledge (De Marchi et al. 2018). In theory, global value chains enable developing nations to improve their position worldwide; however, organizations in emerging countries find it hard to meet the standards/requirements/expectations of advanced markets (Gereffi et al. 2005). ...
... Researchers into GVC and developmental studies generally argue that local industrial upgrading is largely predetermined by a specific mode of governance as global lead firms adopt measures to maintain their dominance in particular GVCs (Bair, 2005;Gereffi et al., 2005Gereffi et al., , 2019. Global lead firms tend to diffuse only mature technologies, such as know-how rather than know-why skills, to local firms (De Marchi et al., 2018;Elisa et al., 2019). ...
This paper examines how latecomer firms manage to achieve industrial upgrading through strategic coupling with global lead firms in automotive production networks. Drawing upon the example of the Guangzhou Automotive Corporation in southern China, this paper theorizes ‘cross‐scalar tension’ as a key factor to explain why the four cases of strategic coupling between lead firms, the same domestic firm and state ended in different results, from decoupling to a sustainable coupling with local upgrading. This paper contributes to the pertinent literature by demonstrating that cross‐scalar tension is inherent to the nature of global production networks, and unreconciled tension concerning different corporate strategies on technological transfer, localization and product development could lead to decoupling. Importantly, good coordination and matching on corporate strategies between lead and domestic firms could relieve cross‐scalar tensions, thus fostering local industrial upgrading and sustainable strategic coupling.
... These innovation hubs encourage GVC actors to interact with non-GVC actors in the national innovation system sector. 19 Through these arrangements, GVC-related knowledge complements local knowledge development channels, such as local industry associations and universities (De Marchi, Giuliani, and Rabellotti, 2018). In particular, these hubs have focused on collaboration models involving multiple stakeholders, moving away from single actor in-house innovation (Bryant, 2015;Expande Minería, 2019;Monitor Deloitte, 2016Upstill and Hall, 2006). ...
Although Peru is one of the main producers of copper worldwide, the domestic industry has not yet fully taken advantage of the potential that the exploitation of this commodity offers. This paper explores the opportunities and challenges that Peruvian suppliers face in their insertion into the mining global value chain. Our analysis is based on a mixed-methods approach, combining both quantitative and qualitative primary and secondary sources, including semi-structured interviews with key actors in the Peruvian mining sector. Our findings suggest that the weak presence of Peruvian suppliers in a sector dominated by few foreign firms is due to global industry dynamics as well as the underdeveloped capabilities of local firms operating in a fragile local institutional setting. However, their opportunities for their insertion are primarily in areas where new solutions are required, which places a demand on the supplier’s innovative capacity.
... However, he remains sceptical because for them, even if the anecdotal evidence is convincing, there is a serious gap in the literature, namely the lack of rigorous empirical evidence on how better access to these connecting services across space and time facilitates the emergence of global value chains. De Marchi et al. (2018), suggest a systematic review of the literature on developing country GVCs to investigate the learning channels used by local firms within (at the firm level and at the collective level) and outside (e.g. external sources of learning) of these value chains. ...
... Some research has explored the role of GVC in the promotion of technological progress and upgrading at the business, industrial, and national levels in developing countries [61,62]. Such research has suggested that developing countries can acquire foreign knowledge (technology) from the GVC that can promote innovation [63], and thus, it can facilitate 'catch-up' through 'learning-by-doing' or 'learning-by-using approaches' [64]. Wang and Fritsch et al. propose that developing countries can benefit from GVC participation in terms of technological progress through three channels, as follows: exporting, importing, and pure knowledge technology spillover [65,66]. ...
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This study utilizes panel data drawn from 239 Chinese cities, and it employs fixed-effects models, mediation models, and spatial spillover models to reexamine the actual impact of the global value chain’s (GVC) participation on regional economic growth. The findings reveal that this impact exhibits a U-shaped nonlinear pattern, with the turning point of GVC occurring at 0.45, which is higher than that of 222 cities. Most cities are on the left side of the U-shaped curve, which corresponds with the second stage of the “in-out-in-again” GVC participation pattern (i.e., the “out” stage). During this stage, a decline in foreign value-added ratio (FVAR), with regard to exports (accompanied by an increase in the domestic value-added ratio), promotes economic growth. Innovation capability acts as a mediator in the relationship between GVC participation and economic growth. Furthermore, GVC participation has significant spillover effects on neighboring cities, with siphon and spillover effects coexisting. Thus, China should focus on establishing domestic value chains and innovation systems, achieving relative independence from existing GVCs dominated by developed countries, enhancing indigenous innovation capabilities, and laying the foundation for the third stage (in-again) of reintegration into GVCs, at the high value-added end, to achieve a higher level of openness. This study explores the nonlinear impact of GVC participation on regional economic growth in China from both theoretical and empirical perspectives, focusing on the finest divisions that remain feasible—cities. This approach expands and supplements the relevant field of research in valuable ways, yielding more realistic research conclusions and policy recommendations.
... In the literature on value chains, lead firms often provide essential support to farmers as part of their commercial relationship with them (Ramirez et al., 2018). That support may include knowledge transfer and technical assistance (De Marchi et al., 2018). Lead firms become engaged in aggregating the production process, adding value to the products to win domestic and international markets (Ponte, 2019). ...
Sustainable agriculture is crucial for achieving SDG2 and building a resilient climate-food system. This study provides a nuanced understanding of factors that influence the adoption of precision agriculture technology by Vietnamese smallholder rice farmers as a sustainable agricultural solution. The study’s objectives are: (1) to provide a nuanced understanding of factors that influence adoption of precision agriculture technology by Vietnamese smallholder rice farmers; and (2) to identify factors associated with agricultural practice in Vietnam that may impact the adoption of precision agriculture technology. The study conducted 35 semi-structured interviews with smallholder rice farmers and agriculture experts. Data were analyzed using iterative thematic analysis. The Unified Theory of Acceptance and Use of Technology (UTAUT) model was used for empirical analysis. The UTAUT constructs of Performance expectancy, Effort expectancy, Government support, and Social influence were found to be determinants of adoption. Trialability and Observability impact Effort expectancy and Performance expectancy. We also discovered that the performance of agricultural cooperatives and support of lead firms play a crucial role in facilitating agricultural technology adoption by Vietnamese smallholder rice farmers. The results confirm the applicability of UTAUT in defining smallholders’ behavioural intention and predicting agricultural technology adoption. The study also provides constructive feedback on the UTAUT model by highlighting the effect of agricultural cooperatives’ performance as innovation intermediaries and of the support of lead firms.
... Most studies analyze the impact of GVCs on economic growth in developing economies through indirect effects such as technology spillovers and competition promotion. Latecomer countries can acquire higher-quality intermediate inputs [29], leverage foreign knowledge (technology) embedded in GVCs to promote innovation [30], and achieve catch-up through a "learning-by-doing" or "learning-by-using" process [31]. GVC participation can also enhance productivity through "selection effects" and "resource reallocation," thereby increasing the proportion of highly skilled labor, promoting the upgrading of human capital [32], and ultimately stimulating economic growth. ...
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Since launching its reforms and opening up, China has actively integrated itself into global value chains (GVCs) and experienced continuous growth. However, there exists a significant imbalance between GVC upgrading and economic growth across regions in China. Can GVC upgrading promote economic growth at the regional level? Despite the theoretical foundations and empirical evidence provided at the national level, research on GVC upgrading at the subnational level remains limited. This study constructs a temporal indicator to measure GVC upgrading at the finest subnational level, including cities at the prefecture level and above, and employs panel fixed effects (FE) and mediation models to examine the impact and mechanism of GVC upgrading on regional economic growth, aiming for a meaningful exploration in this area. The results show that GVC upgrading has a significant positive effect on regional economic growth with robust performance. Specifically, a 1-standard-deviation improvement in GVC upgrading leads to a 0.054-standard-deviation increase in the logarithm of per capita gross domestic product (GDP). Heterogeneity analysis shows that the promotion effect is more pronounced in coastal areas and administrative centers. Mechanism analysis indicates that GVC upgrading promotes regional economic growth by facilitating capital accumulation, promoting technological progress, and enhancing human resources, among which, facilitating capital accumulation plays the most significant role, accounting for over 70% of the economic growth effects associated with GVC upgrading. Thus, China should create an enabling environment for promoting GVC upgrading, enhance capital accumulation, foster regional innovation systems, improve the quality of human capital, and promote domestic market integration.
... In learning organizations, knowledge creation is extremely valuable (Law & Bieng Chuah, 2019) Promoting innovation is done by becoming a member of the network and transferring knowledge. Local and marginal learning, in addition to learning from sources outside the network Membership in a network facilitates knowledge transfer and has a positive effect on innovation (De Marchi et al., 2018) Organizational learning is achieved when the importance of accessing, distributing, and interpreting new external knowledge is appreciated by the staff, and it ensures the progress of developed innovations ...
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Various recent studies have demonstrated that societies which have embraced open innovation methods are more proactive to improve their industrial and economic performance. Exploring several paradigms and theories, the present study was conceived with the goal of determining whether self-organization and organizational learning can indeed affect open innovation environments (OIEs). By collecting field data on the current status of self-organization and learning, this study investigates the impact of the two processes in OIEs on startups. The relationship between self-organization and learning is assessed using structural equation modeling (SEM). After validating the developed model, the cooperative games of the startups in the aforementioned OIE are examined. In the end, the economic value of each startup is obtained through game theory and the Shapley value. The studied startups were valued in both open and closed innovation environments to assess the economic implications of investment under the two paradigms. The results confirm that making investments is more justifiable when a startup is part of an OIE. Moreover, the value of each startup further increased in OIE due to the synergistic effect of collaborating with other startups in the innovation network.
... The structure of the global economy is such that transnational corporations break down their operations and locate them in different regions, none of which, or few of them, are located in Africa (Staritz and Reis, 2013). While several studies on GVC (see; De Backer and Yamano, 2011;De Marchi, Giuliani, and Rabellotti, 2018;Farole, 2016;Ignatenko, Raei, & Mircheva, 2019;OECD, 2007;Rasiah, Kong, & Vinanchiarachi, 2011;Staritz, Plank, and Morris, 2016;Vermeire, Bruton, and Cai, 2017) have presented different contexts and case studies, the argument that foregrounds a call to develop value chains that link Africa with BRICS technologies derives from the fact that Africa is treated as a pariah within the global value chain discourse. Hence, the continent supplies most of the natural resources used in various processes and goods produced by companies in the world. ...
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Global value chains have shaped world production and trade. This research article examines the connections between the value chains of the BRIC economies and South Africa's role in positioning BRICS-Africa trade as a member of the African Continental Free Trade Area (AfCFTA) using BRIC value chains that has been tailormade to increase BRICS share of the AfCFTA market. It argues that in order for BRICS's to increase its competitiveness in AfCFTA and the global market, intra-BRICS trade should be based on value chains that has been developed specifically to support BRICS and provide it with the competitive leverage necessary to explore new market opportunities. AfCTA presents such a market. Additionally, the article reveals that for BRICS to succeed in AfCFTA through its value chains, it must recognise South Africa's potential (to host some of these) and its geographic location on the African continent. Furthermore, BRIC needs to appreciate that South Africa can successfully host some of BRIC nations' value chains. This indicates that South Africa's membership of BRICS and AFCTFA provides an opportunity that can benefit BRICS through its participation in AfCFTA using value chains approach. This however requires academic interrogation, which will yield information and knowledge that can be used to formulate programmes, policies and strategies of how BRICS value chains can be of significant support to AfCFTA.
Today, Global Value Chains (GVCs) have become an essential component of the economic development of both developed and less developed countries, offering significant opportunities to expand exports, diversify production,make costs more efficient, access various transit services, new technologies, and innovate. The objective of this research is to analyze the added value of global value chains at the country level through its main components:added value (Foreign Value Added FVA), domestic value added - domestic value included in a country's exports -(DVA Domestic Value Added) and indirect value-added exports DVX, through machine learning. In addition, the evidence shows that through clustering and correlations, there is another methodology for the study of the added value of GVCs, which allows analyzing countries in groups more similar to each other and different concerning the values inherent to their geographic place.KeywordsGlobal value chainsClustersAdded valueProduction networksInnovation
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Value chain interventions are increasingly used by donors in the context of private sector development. The paper develops a typology of such interventions, and presents the case of one multilateral lending institution – the Inter-American Development Bank. It argues that interventions risk transforming into an empty label and that an understanding of core global value chain (GVC) concepts, such as power, governance, and rents, is necessary. Further, interventions need to consider different learning channels internal and external to GVCs and particularly the interaction of GVCs with local innovation systems, and the interactive and systemic nature of knowledge and learning. These dimensions have often been overlooked in actual policies and programs. The paper concludes that an improvement in the definition of main concepts and approaches derived from the critical tradition of the GVC literature and of learning and innovation concepts is urgently called for. This reinforces the need for a new generation of industrial policies. © 2017 European Association of Development Research and Training Institutes (EADI)
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This study proposes a framework that aims to explain why successive changes in industry leadership (called also the catch-up cycle) occur over time in a sector. In catch-up cycles, latecomer firms and countries emerge as international leaders, whereas incumbents lose their previous positions. New leaders are then dethroned by newcomers. To identify factors at the base of catch-up cycles, this article adopts a sectoral system framework and identifies windows of opportunity that may emerge during the long-run evolution of an industry. This study proposes three windows related to the specific dimensions of a sectoral system. One dimension is related to changes in knowledge and technology. The second dimension pertains to changes in demand, and the third includes changes in institutions and public policy. The combination of the opening of a window (technological, demand, or institutional/policy) and the responses of firms and other components of the sectoral system of the latecomer and incumbent countries determines changes in industrial leadership and catch-up. Sectors differ according to the type of windows that may open and the responses of firms and other components of systems. Empirical evidence of catch-up cycles is presented from six sectors, namely mobile phones, cameras, semiconductors, steel, mid-sized jets, and wines.
China’s technological progress is as spectacular as the growth of its economy since 1978. Technology indicators place China just behind the United States, which has a much higher per capita income. China’s progress is material to Southeast Asia because its per capita income, being similar to that of the Association of South East Asian Nation’s, will have considerable relevance for this region; and China’s technological advance will probably intensify competition between its products and Southeast Asian exports. Yet China possesses features that are arguably unique, the most important being its size and the role of the state. The strategies discussed here—technology alliances with foreign firms, learning by exporting through participation in global supply chains, indigenous innovation aided by the state’s heavy hand, forward engineering through institutionalized commercialization of university- and research institute-based research and development, technology acquisition through mergers and acquisitions, and cost innovation through novel methods of cutting costs—all leverage China’s specific characteristics. Even without these characteristics, Southeast Asian countries, early in the catch-up process, can emulate China’s initial strategies such as technology outsourcing. For more developed Southeast Asia, China’s methods to strengthen technological capacity are important lessons.
Innovation processes in emerging economies tend to differ from those in developed countries in that a larger share of firms absorb existing knowledge. The paper assesses how firms’ absorptive capacity mediates the impact of global value chains on the innovation of handicraft exports in Yogyakarta, Indonesia. The study draws three conclusions. First, the incremental innovation of craft exporters demands specific but rather mundane absorptive capacities of firms, such as language abilities and capable departments. Second, and contrary to what might be expected, the study finds that the governance modes of global value chains do not significantly affect the level of innovation. Third, a group of traders have the highest level of innovation, the highest level of absorptive capacity, and they positively affect the innovation of suppliers. Overall, the findings show that knowledge diffusion is furthered within an emerging local innovation system.