How does insertion in global value chains affect upgrading in industrial clusters?
John Humphrey and Hubert Schmitz* Institute of Development Studies, University of Sussex, Brighton BN1 9RE, UK. j.humphrey@ids.ac.uk h.schmitz@ids.ac.uk What is the scope for local upgrading strategies where producers operate in global value chains? The literature on industrial clusters emphasises the role of inter-firm co-operation and local institutions in enabling upgrading. The value chain literature focuses on the role of global buyers and chain governance in defining upgrading opportunities. This paper argues that clusters are inserted into global value chains in different ways, and that this has consequences for enabling or disabling local-level upgrading efforts. It pays particular attention to the position of developing country firms selling to large, global buyers. Keywords: clusters, value chains, competitiveness, upgrading, developing countries
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Introduction
Firms in developing countries, in common with firms everywhere, are under pressure to improve their performance and increase their competitiveness. New, low-cost producers are entering global markets, intensifying competition in markets for labour-intensive manufactures. How can firms in developing countries respond to this type of challenge while at the same time maintaining returns to both labour and capital from engaging in trade? The literature on competitiveness suggests that the most viable response is to ‘upgrade’ - to make better products, make them more efficiently, or move into more skilled activities (PORTER, 1990; KAPLINSKY, 2000). Several schools of thought have emphasised the local determinants of competitiveness, including the ‘new economic geography’, business studies, regional science and innovation studies. Not only is some of this literature optimistic about the possibility of strengthening competitiveness through local or regional industrial policy (e.g. COOKE and MORGAN, 1998; PYKE,... [continues]
John Humphrey and Hubert Schmitz* Institute of Development Studies, University of Sussex, Brighton BN1 9RE, UK. j.humphrey@ids.ac.uk h.schmitz@ids.ac.uk What is the scope for local upgrading strategies where producers operate in global value chains? The literature on industrial clusters emphasises the role of inter-firm co-operation and local institutions in enabling upgrading. The value chain literature focuses on the role of global buyers and chain governance in defining upgrading opportunities. This paper argues that clusters are inserted into global value chains in different ways, and that this has consequences for enabling or disabling local-level upgrading efforts. It pays particular attention to the position of developing country firms selling to large, global buyers. Keywords: clusters, value chains, competitiveness, upgrading, developing countries
1
Introduction
Firms in developing countries, in common with firms everywhere, are under pressure to improve their performance and increase their competitiveness. New, low-cost producers are entering global markets, intensifying competition in markets for labour-intensive manufactures. How can firms in developing countries respond to this type of challenge while at the same time maintaining returns to both labour and capital from engaging in trade? The literature on competitiveness suggests that the most viable response is to ‘upgrade’ - to make better products, make them more efficiently, or move into more skilled activities (PORTER, 1990; KAPLINSKY, 2000). Several schools of thought have emphasised the local determinants of competitiveness, including the ‘new economic geography’, business studies, regional science and innovation studies. Not only is some of this literature optimistic about the possibility of strengthening competitiveness through local or regional industrial policy (e.g. COOKE and MORGAN, 1998; PYKE,... [continues]
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(2011, 11). How Does Insertion in Global Value Chains Effect Upgrading in Industrial Clusters?. StudyMode.com. Retrieved 11, 2011, from http://www.studymode.com/essays/How-Does-Insertion-In-Global-Value-847321.html
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"How Does Insertion in Global Value Chains Effect Upgrading in Industrial Clusters?" StudyMode.com. 11 2011. 11 2011 <http://www.studymode.com/essays/How-Does-Insertion-In-Global-Value-847321.html>.
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"How Does Insertion in Global Value Chains Effect Upgrading in Industrial Clusters?." StudyMode.com. 11, 2011. Accessed 11, 2011. http://www.studymode.com/essays/How-Does-Insertion-In-Global-Value-847321.html.
