The Rise of Chinese Innovative Firms and the Changing Governance of Global Value Chains
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Asian trans-national garment manufacturers are transforming the structure of global value chains in the apparel industry. Recent studies show such first tier suppliers undertaking a greater range of functional activities. In many cases, these firms originate from the so-called ‘Rising Power’ economies, particularly ‘Greater China’ and South Asia. We argue that such, transnational, Asian firms can play a pivotal and strategic role in shaping the geography and organisational restructuring of the global value chain. Drawing on secondary sources and primary research we illustrate how such firms manage complex international production linkages, and ensure the incorporation of Jordan into the global garment industry. The paper contributes to the understanding of the role of these firms and how their behaviour is driven by complex dynamics linked to their own business strategies, their linkages with buyers, and their ability to exploit production and trade opportunities while maintaining high levels of global locational flexibility.
Restructuring
Global value chain
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This paper discusses globalization’s impact on production and distribution systems in emerging economies. On one hand, globalization has resulted in an increasing number of multinational corporations to adopt a platform strategy for their customers in emerging markets. On the other hand, developing countries have witnessed the integration of an increasing number of traditional marketplaces into a powerful distribution system, characterized as a specialized system. Consequently, an unique industrial organization has developed in emerging economies, regarded as emerging global value chains (EGVCs). They comprise a large number of small firms together with a small number of large platform providers and display the market type general governance patterns. Firms in EGVCs are more likely to realize functional upgrading and grow into strong lead firms.
Global value chain
Value (mathematics)
Emerging Technologies
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Global value chains (GVCs) are the modus operandi of contemporary international trade and production. However, the operational underpinnings of what facilitates or hinders participation of firms in their respective sectoral GVCs are surprisingly understudied. This article attempts to discover the potential factors—ranging from regulatory, institutional, technological, trade-related and financial to sectoral, and input-related elements—affecting GVC participation of automotive firms in India. A firm-level field survey was undertaken to better understand firms’ perceptions regarding these factors. The findings were analysed using principal component analysis (PCA) and partial least squares structural equation modelling (PLS-SEM), which revealed that certain policies such as state government initiatives and the Competition Act, as well as trade facilitation measures like standardisation of procedural requirements and trade agreements were the most significant factors aiding firms’ participation in automotive GVCs, while institutional, technological and input-related aspects were deterrents to such participation. Our findings have important implications for policymaking in the country for encouraging greater GVC participation of firms, especially small and medium enterprises. JEL Codes: F14, F6
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While the global value chain (GVC) literature tends to analyze trade networks and supply chains that are global in the literal sense, I argue that domestically-bound chains led by global firms provide important cases for study through this analytical lens. Importantly, insights regarding the relationship between chain governance and opportunities for upgrading have significant implications for many developing markets even when foreign lead buyers are not fostering export-oriented production. In-depth interviews with representatives from foreign fast-food corporations and their domestic suppliers in Russia provide empirical evidence to support modifications to current theories to better account for how domestic contexts impinge on chain governance and the balance of inter-firm power. I identify factors that provide leverage for domestic actors in these supply chains: regulatory uncertainty, emerging domestic product markets, and the competing interests of foreign firms.
Leverage (statistics)
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After the fundamental reforms, Chinese state firms' governance structure is similar to the coordinated firms' governance structure in coordinated market economies (CMEs) (like Japan, Germany and other Germanic countries). Therefore, the coordinated firms' governance structure in the Chinese state sector generates the organizational competitiveness and the coordinated type of innovation system as that in the CMEs. FDI and technology transfer from CMEs to China drive the convergence of the Chinese state sector towards CMEs. It contributes to the superior performance and technology modernization of the Chinese state sector. The reform of the state firms also makes the state play the coordination role in the technology modernization based on its controlling shareholding in the state firms.
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This paper compares the Chinese economy with liberal market economies (LMEs, e.g., the USA and the UK) and coordinated market economies (CMEs, e.g., Germany and Japan). It aims to define the innovation system of the Chinese economy. In the Chinese state sector, the firms' governance structure is similar to CMEs, and it also generates a coordination-based innovation system. In the Chinese private sector, the firms' governance structure is similar to that of LMEs, and it also generates a market-oriented innovation system. Because of the clear coordination boundary between the two sectors, the institutional complementarities in each are intact. The dual innovation system has enabled the Chinese economy to compete more successfully than LMEs and CMEs which each only have one type of innovation system. Is the Chinese model unique? Can it be replicated in other countries? Does the USA has the potential to build a dual structure superior to the Chinese-style dual structure?
Chinese economy
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Competitor analysis
Economic rent
Product innovation
Open Innovation
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This article uses centrality metrics reflecting position within Global Value Chains (GVCs) to identify central hubs and peripheral European economies and sectors. We find evidence of large changes in the structure of European production networks, with rising importance of Eastern European economies coinciding with the timing of their EU accession. Using cross-country firm-level data from ORBIS, we find that changing structure of GVCs can play a role in the catch-up of firms, but the effects are heterogeneous across firms and countries. First, becoming more central is associated with faster productivity growth of firms in post-2004 EU members. Second, the average productivity (centrality weighted) of buyers/suppliers matters for the productivity of firms overall in other European economies, and particularly non-frontier (initially less productive) firms in both groups of countries. The results for post-2004 EU members suggest that policies to encourage integration into GVCs are particularly important for the productivity of emerging or less integrated economies, whereas for more advanced economies a more sophisticated policy is needed that encourages the formation of linkages with productive, frontier foreign firms and economies.
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The focus of this chapter is on local firms in emerging markets as participants in global value chains (GVCs), and how some of them make the transition from local assembler to value chain. The purpose of this chapter is not to provide a comprehensive literature review; rather, the authors discuss key GVC concepts that are relevant to their focus. The chapter begins with an overview of the GVC notion highlighting the issues of governance and upgrading. Next, it briefly reviews the following key drivers of GVCs in emerging markets: level of economic development, maturity of institutions, science and technology level, and company management capabilities. The authors then highlight the rise of EM firms within GVCs in three phases: (1) local assemblers, (2) component manufacturers, and (3) value-adding innovators and partners. The chapter closes with a discussion on the implications for international theory and future research, noting the rise of anti-globalization sentiments and the imperative for innovation within GVCs.
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