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Global Value Chains and Global Production
Networks: Organizing the World Economy
Henry Wai-chung Yeung
Professor of Economic Geography, National University of Singapore
Email: [email protected];
Homepage: http://courses.nus.edu.sg/course/geoywc/henry.htm
The key organizational feature of
the global economy?
• “Global Value Chains are defined by fragmented supply
chains, with internationally dispersed tasks and activities
coordinated by a lead firm (a TNC)” (UNCTAD, 2013, p.125;
original italics).
• Data gathering exercises: UNCTAD, OECD, WTO, JETRO,
Eurostat…
• Now firmly on the agenda among leading international
economic organizations and development agencies, including
ADB.
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The phenomenon
• “About 60% of global trade, which today amounts to more
than $20 trillion, consists of trade in intermediate goods and
services that are incorporated at various stages in the
production process of goods and services for final
consumption” (UNCTAD, 2013, p. 122)
• Not new, but since 2000 trade and FDI have increased
exponentially, and ahead of GDP growth, highlighting a
growth in TNC coordinated global value chains and global
production networks.
• Beyond national economies and basic trade data, and
beyond TNCs and FDI, to more complex organizational
structures involving intra-firm trade, inter-firm strategic
partnership, arm’s length trade and non-equity modes e.g.
subcontracting
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Table 4.1 The role of East Asian economies in global production networks measured by value of total trade in intermediate
manufactured goods (IMG), 1988-2006 (in US$billion and percentage)
Economy
World rank
Total IMG trade in
2006
Share of world total in
2006
Cumulative average
growth rate, 1988-2006
Tiger economies
South
Korea
Republic
of Korea
Taipei,China
Singapore
Hong Kong, China
Total
12
14
11
6
-
286.4
246.2
289.6
372.3
1,194.7
3.0
2.6
3.0
3.9
-
10.6
14.3
17.2
17.7
14.9
PRC
Mexico
Malaysia
Thailand
India
3
15
17
18
21
807.9
228.8
162.3
121.1
114.1
8.5
2.4
1.7
1.3
1.2
24.0
23.3
12.5
13.2
11.7
Japan and North America
-
1,928.4
-
6.9
Western Europe
-
3,377.1
-
6.7
Top 50 economies
-
9,110.9
-
12.4
Source: Based on UN COMPTRADE data presented in Whittaker et al. (2010: Table 1, p.449).
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A production/value chain: the basics
Source: Dicken, 2011, Figure 3.3c
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Four key dimensions of any value chain
1. Input-output structure: tasks/functions vs firms
2. Territoriality: concentrated, dispersed…combinations
3. Governance: coordination and control, by who and how?
4. Institutional context: rules of the game, business cultures
Organizational and spatial fragmentation of production: two
key processes of globalization and externalization
Reworking the four dimensions: more complicated
structures, more global geography, more complex
modes of governance, more supportive regulatory
regimes
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Terminology, drivers, and outcomes
International production sharing, trade in tasks, trade in
value added, trade in capabilities, outsourcing,
offshoring, fragmented production, vertical
specialization…global value chains, global production
networks
Drivers:
•Lead firms searching for spatial, organizational and
technological ‘fixes’ to challenges of global competition
•Costs and capabilities
•Market making and the rise of ‘big buyers’
•Financial discipline
•Managing uncertainty and risk
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Terminology, drivers, and outcomes
Development outcomes:
•Strategic coupling
•Upgrading: industrial and social
•Path dependency and regional lock-ins
•Vulnerabilities and disarticulations
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GVCs: producer versus buyer-driven (1)
Source: adapted from Gereffi, 1994, Figure 1.
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GVCs: producer versus buyer-driven (2)
Source: Coe, Kelly and Yeung, 2013, Table 8.1
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A more sophisticated typology
Source: Gereffi et al., 2005, Figure 1
13
Source: Abe (2013: 398).
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The upgrading debate
1. Process upgrading: improving the efficiency of the
production system (e.g. ISO quality management)
2. Product upgrading: moving into more sophisticated
products or services
3. Functional upgrading: taking on new roles in the chain
at higher levels of value added (OEM-ODM-OBM)
4. Chain or intersectoral upgrading: using knowledge
from one chain to enable a move into another sector
Important points:
- Firms upgrade, not places or countries…but can drive
economic development
- Economic upgrading does not always lead to social
upgrading in terms of labour terms and conditions
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GPNs: different from GVCs?
Yes and no! Used interchangeably often e.g.
WTO, OECD, UNCTAD
1. Complex intra-, inter- and extra-firm
networks: incorporates a wider range of intrafirm actors and non-firm organisations
2. Importance of institutional context – in terms
of rules/regulations, but also business cultures
3. Multi-scalar, from local to the global
4. Concerned with the territorial development
impacts of network formations
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Electronics
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GPNs: strategic partnership through Original
Design Manufacturing (ODM)
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GPNs and regional development
Global Production Networks
Focal firms
Subsidiaries, partners, suppliers
Customers
Strategic coupling
process
Source: adapted from Coe et al.,
2004, Figure 1
‘Regional’ Institutions
Government agencies
Labour organizations
Business associations
Regional Development
Value creation
Value enhancement
Value capture
Dependency and
transformations
Regional Assets
Technology
Labour
Local firms
Natural resources
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Policy implications for emerging economies?
• From national industries to specialized niches in GPNs
• Detailed knowledge and analysis of regional and global
production networks
• Goal is to capture investment and improve value-adding
position in mobile segments of GVCs, currently spreading
or already present (cf. upgrading)
• Facilitating imports of appropriate raw materials,
intermediate goods and services
• New inward investment targets: global suppliers
• Leveraging GPNs for local firm and market development
(for large economies especially)
• Some things remain constant: skills, infrastructure,
logistics, tax regimes
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References/further reading
Abe, Masato (2013), ‘Expansion of global value chains in Asian developing countries: Automotive case study in the Mekong subregion’, in
Deborah K. Elms and Patrick Low (eds.), Global Value Chains in a Changing World, Geneva: World Trade Organization, pp.385-409.
Ando, M. and Kimura, F. (2010), ‘The spatial pattern of production and distribution networks in East Asia’, in P.C. Athukorala (ed.), The Rise
of Asia: Trade and Investment in Global Perspective, London: Routledge.
Coe, N.M., Kelly, P.F. and Yeung, H.W-C. (2013) Economic geography: a contemporary introduction, Second edition, Wiley, Hoboken, NJ.
Coe, N.M., Hess, M., Yeung, H.W.C., Dicken, P. and Henderson, J. (2004) Globalizing regional development: a global production networks
perspective, Transactions of the Institute of British Geographers, 29, 468-484.
Dicken, P. (2011), Global Shift: Mapping the Changing Contours of the World Economy, Sixth Edition, Sage, London.
Gereffi, G. (1994) The organization of buyer-driven global commodity chains: how U.S. retailers shape overseas production networks. In G.
Gereffi and M. Korzeniewicz, eds. Commodity Chains and Global Development, Praeger, Westport, Conn, 95-122.
Gereffi, G. and Sturgeon, T. (2013) Global value chain-oriented industrial policy: the role of emerging economies, in D.K. Elms and P. Low
(eds.) (2013) Global Value Chains in a Changing World, World Trade Organization, Geneva, 329-360.
Gereffi, G., Humphrey, J. and Sturgeon, T. (2005) The governance of global value chains’, Review of International Political Economy, 12, 78104.
Neilson, Jeffrey, Pritchard , Bill and Yeung, Henry Wai-chung (eds.) (2014), ‘Special issue on global value chains and global production
networks in the changing international political economy’, Review of International Political Economy, Vol.21(1), pp.1-274.
Parrilli, Mario Davide, Nadvi, Khalid and Yeung, Henry Wai-chung (2013), ‘Local and regional development in global value chains, production
networks and innovation networks: a comparative review and the challenges for future research’, European Planning Studies, Vol.21(7),
pp.967-88.
UNCTAD (2013) World Investment Report 2013: Global Value Chains – Investment and Trade for Development, United Nations, New York.
WTO and IDE-JETRO (2011) Trade Patterns and Global Value Chains in East Asia: From Trade in Goods to Trade in Tasks, World Trade
Organization and Institute of Developing Economies, Geneva and Tokyo.
Yang, You-Ren and Hsia, Chu-Joe (2007), ‘Spatial clustering and organizational dynamics of trans-border production networks: a case study
of Taiwanese IT companies in the Greater Suzhou Area, China’, Environment and Planning A, Vol.39(6), pp.1382-1402.
Yeung, Henry Wai-chung (2009), ‘Regional development and the competitive dynamics of global production networks: An East Asian
perspective’, Regional Studies, Vol.43(3), pp.325-51.
Yeung, Henry Wai-chung (ed.) (2010), Globalizing Regional Development in East Asia: Production Networks, Clusters, and
Entrepreneurship, Regions and Cities Series No.41, London: Routledge.
Yeung, Henry Wai-chung (2014), ‘Governing the market in a globalizing era: developmental states, global production networks, and inter-firm
dynamics in East Asia’, Review of International Political Economy, Vol.21(1), pp.70-101.
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