Global value chains and development

Agriculture, food and global value chains: issues, methods and challenges

While much of the literature on global value chains (GVC) has addressed strategy, structure, and governance, less is known regarding the relationship between lead firms and global value chain performance. Lead firms are influential, organizing, and strategic actors inside global value chains which drive the value addition and distribution by externalizing low value-added activities. The purpose of our paper is to explore the linkage between the lead firm's and GVC performance. We incorporate social capital theory, relational embeddedness, and global value chain governance to propose that lead firms may: (1) facilitate successful strategic alliances in global value chains through partner selection, (2) enable success over and beyond formal contracts by enabling embeddedness, and (3) reduce exchange costs and enable investment into new capabilities by facilitating knowledge transfer and learning by the mechanism of lead firm social capital. We also discuss global value chain performance measures in terms of the processes and activities which contribute to comparative location advantages or sustained competitive advantage of the value chain members. Our model contributes to the literature on global value chain governance by delineating the lead firm's resources through social capital theory.

Recent decades have witnessed an increasing integration of developing countries into global value chains (GVCs). This growing participation in global production sharing has raised hopes for economic upgrading within such value chains. However, globalization has intensified international competition, and achieving economic upgrading is not an easy task. Moreover, the social consequences of participating in GVCs are not always positive; however, they have received considerably less attention in the literature. This paper suggests a simple and parsimonious approach to measuring economic and social upgrading (and downgrading) in GVCs. Applying this parsimonious methodology and using quantitative secondary data, we analyze how widespread upgrading has been in four selected manufacturing GVCs: apparel, wood furniture, automotive, and mobile phones. We also investigate to what extent downgrading is part of the reality and undertake a comparative analysis across GVCs, regions and country groups (developing vs. developed countries). We find that the promise of industrial upgrading through participation in GVCs does not materialize for everyone. Indeed, economic upgrading has taken place in just over a quarter of the countries in our sample, among them mainly developing countries. Finally, we examine the relationship between economic performance and social performance in the different GVCs to investigate whether or not economic upgrading is typically associated with social upgrading. While patterns differ across GVCs, we find that economic upgrading is more likely to occur simultaneously with social upgrading than without, and vice versa. Our analysis, thus, suggests that economic upgrading is conducive to, but not sufficient for, social upgrading to occur.

The rise of global value chains (GVCs) has been associated with the rapid expansion of outsourcing by lead firms in the global North to interlinked networks of cross-border suppliers in developing countries. Outsourcing was facilitated by trade and financial liberalization initiated in the 1970s and 1980s, and driven by intense competitive pressures for cost reduction. GVC and global production network (GPN) analysis provide crucial insights into inter-firm coordination and governance, with diverse and uneven embeddedness across an expanding range of countries (Coe and Yeung, 2015; Dicken et al., 2001; Gereffi et al., 2001, 2005). The consequences for suppliers and workers have been mixed. The search for cost reduction went hand in hand with entry into relatively unregulated environments leading to what Appelbaum et al. (2005) have called ‘the race to the bottom’ in many industries. At the same time, buyer pressure for product quality and consistency has increased the demands on suppliers to comply with private standards and monitoring (Nadvi, 2008). For some the outcome has led to a combination of economic upgrading (suppliers moving to higher value activities) and social upgrading (better terms and conditions for workers), while others have experienced economic and social downgrading (Barrientos et al., 2011a; Lee and Gereffi, 2015). Global outsourcing has led to the creation of new architectures for the organization of production, trade and consumption in the global economy. Today multilateral organizations (including the WTO, World Bank and OECD) have acknowledged that GVCs have reshaped traditional trading patterns between nations. UNCTAD (2013) estimates that 80% of world trade now passes through GVCs. Furthermore the developing country share in global value-added trade increased from 20% in 1990 to over 40% today, and GVC participation contributes 28% to their GDP on average. Global production has opened up new opportunities for employment to millions of workers in developing countries. The International Labour Organisation (ILO) estimates that in 2013, 453 million jobs were GVC

Global value chains (GVCs) have changed the nature of production and specialisation around the world, including in agriculture and food sectors. This study takes an in-depth look at the landscape of agro-food GVCs and explores the factors that influence GVC participation by making use of a newly developed database on trade in value added for 20 agro-food sectors derived from the Global Trade Analysis Project (GTAP) database. The study also explores the benefits of GVC participation, viewed through the lens of domestic value added creation and employment, with a focus on the policy factors that influence these benefits. The study points to considerable variation in GVC participation across agro-food sectors, driven not only by product characteristics but also by policy factors related to trade and investment, the agricultural enabling environment and policies influencing service markets. The study shows that for agro-food sectors, trade barriers act as a tax on exports, reducing the domestic value added created from participation in agro-food GVCs.

This book brings together a set of studies on labour conditions in global value chains (GVCs) in a variety of sectors, ranging from labour-intensive sectors (garments, fresh fruits, tourism), to medium and high technology sectors (automobiles, electronics and telecom) and knowledge-intensive sectors (IT software services). The studies span a number of countries across Asia - Bangladesh, Cambodia, China, India, Indonesia, Sri Lanka and Vietnam. This book stands out for its grounded and detailed examination of both what is working and what is not working as Asian labour gets more embedded in global value chains. In trying to identify spaces for progressive action and policies in the current GVC-linked global work environment, the book goes against the grain in searching for an alternative to laissez faire forms of globalisation.

Dev Nathan, Meenu Tiwari and Sandip Sarkar (Eds). 2016. Labour in Global Value Chains in Asia—Development Trajectories in Global Value Chains. Cambridge, UK: Cambridge University Press, p. 560. US$150. ISBN: 9781107103740 (Hardback)

Institutional Change in Value Chains: Evidence from Tea in Nepal

Abstract. A resurrected interest in agriculture has brought in its wake growing interest in smallholders in the global South by scholars, companies, governments and development agencies alike. While non-governmental organisations and development agencies see the potential to reduce poverty, companies look upon smallholder agriculture as a widely untapped resource for the sourcing of crops and as a sales market for agricultural inputs. While the important role of large corporate buyers of agricultural produce as lead firms in value chains is often discussed and emphasised, the power of providers of technology and agricultural inputs is being rather neglected. In this paper, we analyse two case studies of technology and input providers in agricultural value chains and their role in smallholder inclusion with the aim of finding out how such companies impact the governance of the value chains. To do so we combine insights from the value chain literature with the concept of framing/overflowing.

In Chapter 3, we saw that a reconsideration of the forces of international capital mobility, technological change and social institutions requires a change in traditional thinking on the determinants of trade. In this chapter, we use the global value chain (GVC) as the unit of analysis of international trade. The gains from offshoring are based on the increase in profits and wages and the creation of jobs. Key is the distribution of value added across producers within the value chain and the resulting potential for “dynamic gains.” These gains come especially from the reinvestment of the profits that emerge from successful GVC management. Lead firms in GVCs raise cost markups and profitability by focusing on core competence and otherwise reducing operations, especially in the domestic market. GVC management has been an important part of corporate strategy to retain oligopoly power and the rents that go with it. The cost and ease of international communication has fallen, the supply of available labor and productive capacity globally has greatly expanded, and the quality of production and logistical capability of developing country firms has grown. The globalization of production along these lines creates an asymmetry of market structures within the GVC with oligopoly lead firms and competition among suppliers. Expansion of offshoring can also support a financialization of the non-financial corporate sector.

This paper is a paper in a series of work on Global Value Chains (GVCs), developed under the auspices of the Joint Research Centre (JRC) of the European Commission. It builds upon the theoretical discussion presented in the first two papers and offers a new methodological approach for mapping GVCs, using a bespoke dataset of the most innovative biopharma MNEs. The paper takes the example of the global biopharma value chain and describes the step-by-step procedure for mapping interconnected capabilities at a global scale, the concentration of biopharma capabilities in Europe, and two cases of regional and national specialisation in this sector. The proposed methodological approach contains two distinctive methodologies – for top-down global value chain mapping of an established industry sector (such as biopharma), and for a bottom-up mapping of capabilities within the GVC that operate at specific locations. Both methodologies can be applied to emerging sectors and segments driven by key enabling technologies, such as photonics, advanced materials, 3D printing, or renewable energy, or any other cross-sectoral value chains. The paper includes two cases of application of this methodology at regional and national level. These are the cases of Bulgaria and the Greater South East of England in the UK. The novel methodology and methods for data collection and visualisation demonstrate the linkages across segments of the biopharmaceutical GVC and the position of firms at the cross-section of biotechnology discovery and pharmaceutical drug development and manufacturing activities, managing a complex network of outsourcing, insourcing and supply relationships, through a vast empire of subsidiaries around the world. Capturing and representing the value-chain within biopharma MNEs enables policy makers to understand the complexity of industry organisation across multiple locations around the world and the global knowledge and resource linkages that drive further growth in the sector.

Since German Volkswagen accessed to Chinese market in building a joint venture in the mid-1980s, the automobile industry in China has been engaged in global value chain (GVC) activities for more than three decades. China went through three stages of start-up, large-scale expansion and overseas M&A, and very quickly established a comprehensive manufacturing system, remaining the world's first place after 2009 in terms of output and sales. However, in line with the rapid expansion of production scale, automobile industry in China, due to the lack of some value-added links in the global value chain of automobiles, has failed to form a closed-loop reflux pattern in the GVC of automobile industry, resulting in a significant segmentation phenomenon. It mainly manifested in: 1) In the production process, there is the break between the upstream design and key parts against the mass local vehicle manufacturing, and the high-added value chain links are held by foreign operators. 2) In the sales process, there exists a fault zone between large-scale sales of vehicles and very few export volumes. And the value chain of automobile industry in China has not been effectively extended to overseas market. This paper further investigates main reasons behind the segmentation of the automobile industry value chain in China: 1) the business strategy of multinational automobile companies aim to seize of China's local automobile market, which blocks the overseas extension of the value chain; 2) The control of domestic automobile sales channels by the foreign stake in JVs leads to the monopoly of supply chain and post-market of automobile industry, which indirectly leads to the segmentation of value chain. 3) Low value acquisition mode of independent brand automobile enterprises is isolated in the high value-added link of global value chain, which leads to the segmentation of value chain directly. 4) Some of the industrial and trade policies lead to the abnormal high price in automobile market and the difficulty of extending the overseas value chain. Furthermore, this paper puts forward the research prospect of whether the value chain segmentation of automobile industry in China exists for a long time, and the alike problem of value chain segmentation. The new energy vehicles will confront.

In recent years, Internet connectivity has greatly improved across the African continent. This article examines the consequences that this shift has had for East African firms that are part of global value chains (GVCs). Prior work yielded contradictory expectations: firms might benefit from connectivity through increased efficiencies and improved access to markets, although they might also be further marginalized through increasing control of lead firms. Drawing on extensive qualitative research in Kenya and Rwanda, including 264 interviews, we examine 3 sectors (tea, tourism, and business process outsourcing) exploring overarching, cross-cutting themes. The findings support more pessimistic expectations: small African producers are only thinly digitally integrated in GVCs. Moreover, shifting modes of value chain governance, supported by lead firms and facilitated by digital information platforms and data standards are leading to new challenges for firms looking to digitally integrate. Nevertheless, we also find examples in these sectors of opportunities where small firms are able to cater to emerging niche customers, and local or regional markets. Overall, the study shows that improving connectivity does not inherently benefit African firms in GVCs without support for complementary capacity and competitive advantages.

Recalibrating Contract Law: Choses in Action, Global Value Chains and the Enforcement of Obligations Outside of Privity

Nathan D, Tewari M and Sarkar S (eds.), <i>Labour in Global Value Chains in Asia (Development Trajectories in Global Value Chains)</i>