- Global value chains capture the links among enterprises spread across a
variety of locations around the world that perform a sequence of related and
dependent activities to bring a product or service from conception through
the different phases of production to delivery, and to final consumers and
disposal after use.
- The global value chains are outcomes of the increasing tendency of transnational
corporations to focus primarily on core activities—such as design, technology,
branding, logistics, marketing, and after-sales service.
- The spread of global value chains implies that innovation and the creation
of value are not confined solely to production. They also involve all other
activities in value chain, making it easier to innovate and learn in networks
than through arm’s length transactions or intra-firm trade.
- The characteristics of global value chains, their organization, the strategies
of the leading players in them, and their dynamics can directly affect the
process of upgrading of local players in developing countries.
- The crucial issue for developing countries is to innovate and learn within
global value chains and networks. At the core of this issue are two major
challenges. One is making strategic choices on the linking relationship to
gain the right technology and knowledge. The other is related to finding a
way of entering these global value chains and to access the chains’ lead
firms, either directly as a supplier or indirectly as a second-tier supplier.
- Competing in global value chains can build foundations for innovation and
learning. Critical factors for latching onto global value chains are not only
price, quality and punctuality but also the willingness to learn and absorb
from the lead enterprises.
- Entering global value chains does not provide an automatic move up the
capability ladder, but rather a fast track to acquiring production capabilities.
Moving further up the chain can lead to conflicts with existing customers,
but for latecomers, the challenge is to confront this and to engage in purposive
and directed effort to use the links effectively to gain knowledge and to
learn.
- For efficient insertion of local firms into global value chains, key industry
players must be prepared to champion the cause of cooperation and network
building. Also needed are: a trusty environment that encourages cooperation
through policy support, support from key players at all levels of the value
chain, and a ‘critical mass’ of relevant stakeholders to effect
change.
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