Economic and Social Upgrading in Global Value Chains and Industrial Clusters: Why Governance Matters

© 2014, Springer Science+Business Media Dordrecht.The burgeoning literature on global value chains (GVCs) has recast our understanding of how industrial clusters are shaped by their ties to the international economy, but within this context, the role played by corporate social responsibility (CSR) continues to evolve. New research in the past decade allows us to better understand how CSR is linked to industrial clusters and GVCs. With geographic production and trade patterns in many industries becoming concentrated in the global South, lead firms in GVCs have been under growing pressure to link economic and social upgrading in more integrated forms of CSR. This is leading to a confluence of “private governance” (corporate codes of conduct and monitoring), “social governance” (civil society pressure on business from labor organizations and non-governmental organizations), and “public governance” (government policies to support gains by labor groups and environmental activists). This new form of “synergistic governance” is illustrated with evidence from recent studies of GVCs and industrial clusters, as well as advances in theorizing about new patterns of governance in GVCs and clusters.

Global value Chains, rising power firms and economic and social upgrading

© Emerald Group Publishing Limited.Purpose – The purpose of this paper is to introduce the global value chain (GVC) approach to understand the relationship between multinational enterprises (MNEs) and the changing patterns of global trade, investment and production, and its impact on economic and social upgrading. It aims to illuminate how GVCs can advance our understanding about MNEs and rising power (RP) firms and their impact on economic and social upgrading in fragmented and dispersed global production systems. Design/methodology/approach – The paper reviews theGVCliterature focusing on two conceptual elements of the GVC approach, governance and upgrading, and highlights three key recent developments in GVCs: concentration, regionalization and synergistic governance. Findings – The paper underscores the complicated role of GVCs in shaping economic and social upgrading for emerging economies, RP firms and developing country firms in general. Rising geographic and organizational concentration in GVCs leads to the uneven distribution of upgrading opportunities in favor of RP firms, and yet economic upgrading may be elusive even for the most established suppliers because of power asymmetry with global buyers. Shifting end markets and the regionalization of value chains can benefit RP firms by presenting alternative markets for upgrading. Yet, without further upgrading, such benefits may be achieved at the expense of social downgrading. Finally, the ineffectiveness of private standards to achieve social upgrading has led to calls for synergistic governance through the cooperation of private, public and social actors, both global and local. Originality/value – The paper illuminates how the GVC approach and its key concepts can contribute to the critical international business and RP firms literature by examining the latest dynamics in GVCs and their impacts on economic and social development in developing countries.

Attentional Biases in Value-Based Decision-Making

Humans make decisions in highly complex physical, economic and social environments. In order to adaptively choose, the human brain has to learn about- and attend to- sensory cues that provide information about the potential outcome of different courses of action. Here I present three event-related potential (ERP) studies, in which I evaluated the role of the interactions between attention and reward learning in economic decision-making. I focused my analyses on three ERP components (Chap. 1): (1) the N2pc, an early lateralized ERP response reflecting the lateralized focus of visual; (2) the feedback-related negativity (FRN), which reflects the process by which the brain extracts utility from feedback; and (3) the P300 (P3), which reflects the amount of attention devoted to feedback-processing. I found that learned stimulus-reward associations can influence the rapid allocation of attention (N2pc) towards outcome-predicting cues, and that differences in this attention allocation process are associated with individual differences in economic decision performance (Chap. 2). Such individual differences were also linked to differences in neural responses reflecting the amount of attention devoted to processing monetary outcomes (P3) (Chap. 3). Finally, the relative amount of attention devoted to processing rewards for oneself versus others (as reflected by the P3) predicted both charitable giving and self-reported engagement in real-life altruistic behaviors across individuals (Chap. 4). Overall, these findings indicate that attention and reward processing interact and can influence each other in the brain. Moreover, they indicate that individual differences in economic choice behavior are associated both with biases in the manner in which attention is drawn towards sensory cues that inform subsequent choices, and with biases in the way that attention is allocated to learn from the outcomes of recent choices.

Essays on the Role of Government Incentives in the Private Provision of Social Goods

The economic rationale for public intervention into private markets through price mechanisms is twofold: to correct market failures and to redistribute resources. Financial incentives are one such price mechanism. In this dissertation, I specifically address the role of financial incentives in providing social goods in two separate contexts: a redistributive policy that enables low income working families to access affordable childcare in the US and an experimental pay-for-performance intervention to improve population health outcomes in rural India. In the first two papers, I investigate the effects of government incentives for providing grandchild care on grandmothers’ short- and long-term outcomes. In the third paper, coauthored with Manoj Mohanan, Grant Miller, Katherine Donato, and Marcos Vera-Hernandez, we use an experimental framework to consider the the effects of financial incentives in improving maternal and child health outcomes in the Indian state of Karnataka.

Grandmothers provide a significant amount of childcare in the US, but little is known about how this informal, and often uncompensated, time transfer impacts their economic and health outcomes. The first two chapters of this dissertation address the impact of federally funded, state-level means-tested programs that compensate grandparent-provided childcare on the retirement security of older women, an economically vulnerable group of considerable policy interest. I use the variation in the availability and generosity of childcare subsidies to model the effect of government payments for grandchild care on grandmothers’ time use, income, earnings, interfamily transfers, and health outcomes. After establishing that more generous government payments induce grandmothers to provide more hours of childcare, I find that grandmothers adjust their behavior by reducing their formal labor supply and earnings. Grandmothers make up for lost earnings by claiming Social Security earlier, increasing their reliance on Supplemental Security Income (SSI) and reducing financial transfers to their children. While the policy does not appear to negatively impact grandmothers’ immediate economic well-being, there are significant costs to the state, in terms of both up-front costs for care payments and long-term costs as a result of grandmothers’ increased reliance on social insurance.

The final paper, The Role of Non-Cognitive Traits in Response to Financial Incentives: Evidence from a Randomized Control Trial of Obstetrics Care Providers in India, is coauthored with Manoj Mohanan, Grant Miller, Katherine Donato and Marcos Vera-Hernandez. We report the results from “Improving Maternal and Child Health in India: Evaluating Demand and Supply Side Strategies” (IMACHINE), a randomized controlled experiment designed to test the effectiveness of supply-side incentives for private obstetrics care providers in rural Karnataka, India. In particular, the experimental design compares two different types of incentives: (1) those based on the quality of inputs providers offer their patients (inputs contracts) and (2) those based on the reduction of incidence of four adverse maternal and neonatal health outcomes (outcomes contracts). Along with studying the relative effectiveness of the different financial incentives, we also investigate the role of provider characteristics, preferences, expectations and non-cognitive traits in mitigating the effects of incentive contracts.

We find that both contract types input incentive contracts reduce rates of post-partum hemorrhage, the leading cause of maternal mortality in India by about 20%. We also find some evidence of multitasking as output incentive contract providers reduce the level of postnatal newborn care received by their patients. We find that patient health improvements in response to both contract types are concentrated among higher trained providers. We find improvements in patient care to be concentrated among the lower trained providers. Contrary to our expectations, we also find improvements in patient health to be concentrated among the most risk averse providers, while more patient providers respond relatively little to the incentives, and these difference are most evident in the outputs contract arm. The results are opposite for patient care outcomes; risk averse providers have significantly lower rates of patient care and more patient providers provide higher quality care in response to the outputs contract. We find evidence that overconfidence among providers about their expectations about possible improvements reduces the effectiveness of both types of incentive contracts for improving both patient outcomes and patient care. Finally, we find no heterogeneous response based on non-cognitive traits.

Public-Private Partnership Design for Inclusive Cocoa Global Value Chains in Ghana

Within 10 years, there could be a severe global shortage in the supply of cocoa, according to industry practitioners and other experts. Due to global population growth and the emergence of a growing global middle class, by 2025 the cocoa crop would need to increase by nearly 50 per cent to keep up with projected demand. A potential shortage of supply is a direct threat to the business model of lead firms – including cocoa grinders and processors, chocolate confectioners, and retail distributors. But these international firms – the ones that will suffer the most if there is a shortage of cocoa supply – are helping create the market failure that is stifling sustainability. Functioning as a two-tiered consolidated oligopoly with a combined market share of approximately 89%, these firms enjoy the largest portion of value capture in the cocoa-chocolate global value chain (GVC). The smallholder cocoa producers, conversely, are trapped in low value-add segments of the GVC. In fact, most smallholder farmers survive on less than $1.00 per day per capita, on average in many cocoa exporting countries. In Ghana - the second largest producer of cocoa in the world - the government has accomplished little to help these smallholders upgrade and make cocoa an attractive sector for the next generation to inherit. The result – both in Ghana and around the world – is a lack of sustainability of the supply of cocoa. Demand is already beginning to outstrip supply. As a result of these underlying circumstances, the United States Agency for International Development (USAID) has posed the following policy question: "Under what conditions could USAID, as a development agency, support and enhance potential public-private partnerships in order to improve the bargaining power (and financial wherewithal) of smallholder organizations and farmers in the context of the global value chain for cocoa in Ghana?"

Networks versus vertical integration

We construct a theory to compare vertically integrated firms to networks of manufacturers and suppliers. Vertically integrated firms make their own specialized inputs. In networks, manufacturers procure specialized inputs from suppliers that, in turn, sell to several manufacturers. The analysis shows that networks can yield greater social welfare when manufacturers experience large idiosyncratic demand shocks. Individual firms may also have the incentive to form networks, despite the lack of long-term contracts. The analysis is supported by existing evidence and provides predictions as to the shape of different industries.

Rationale and design of the Exercise Intensity Trial (EXCITE): A randomized trial comparing the effects of moderate versus moderate to high-intensity aerobic training in women with operable breast cancer.

BACKGROUND: The Exercise Intensity Trial (EXcITe) is a randomized trial to compare the efficacy of supervised moderate-intensity aerobic training to moderate to high-intensity aerobic training, relative to attention control, on aerobic capacity, physiologic mechanisms, patient-reported outcomes, and biomarkers in women with operable breast cancer following the completion of definitive adjuvant therapy. METHODS/DESIGN: Using a single-center, randomized design, 174 postmenopausal women (58 patients/study arm) with histologically confirmed, operable breast cancer presenting to Duke University Medical Center (DUMC) will be enrolled in this trial following completion of primary therapy (including surgery, radiation therapy, and chemotherapy). After baseline assessments, eligible participants will be randomized to one of two supervised aerobic training interventions (moderate-intensity or moderate/high-intensity aerobic training) or an attention-control group (progressive stretching). The aerobic training interventions will include 150 mins.wk⁻¹ of supervised treadmill walking per week at an intensity of 60%-70% (moderate-intensity) or 60% to 100% (moderate to high-intensity) of the individually determined peak oxygen consumption (VO₂peak) between 20-45 minutes/session for 16 weeks. The progressive stretching program will be consistent with the exercise interventions in terms of program length (16 weeks), social interaction (participants will receive one-on-one instruction), and duration (20-45 mins/session). The primary study endpoint is VO₂peak, as measured by an incremental cardiopulmonary exercise test. Secondary endpoints include physiologic determinants that govern VO₂peak, patient-reported outcomes, and biomarkers associated with breast cancer recurrence/mortality. All endpoints will be assessed at baseline and after the intervention (16 weeks). DISCUSSION: EXCITE is designed to investigate the intensity of aerobic training required to induce optimal improvements in VO₂peak and other pertinent outcomes in women who have completed definitive adjuvant therapy for operable breast cancer. Overall, this trial will inform and refine exercise guidelines to optimize recovery in breast and other cancer survivors following the completion of primary cytotoxic therapy. TRIAL REGISTRATION: NCT01186367.

Why do nominal characteristics acquire status value? A minimal explanation for status construction.

Why do beliefs that attach different amounts of status to different categories of people become consensually held by the members of a society? We show that two microlevel mechanisms, in combination, imply a system-level tendency toward consensual status beliefs about a nominal characteristic. (1) Status belief diffusion: a person who has no status belief about a characteristic can acquire a status belief about that characteristic from interacting with one or more people who have that status belief. (2) Status belief loss: a person who has a status belief about a characteristic can lose that belief from interacting with one or more people who have the opposite status belief. These mechanisms imply that opposite status beliefs will tend to be lost at equal rates and will tend to be acquired at rates proportional to their prevalence. Therefore, if a status belief ever becomes more prevalent than its opposite, it will increase in prevalence until every person holds it.

Serotonin transporter genotype modulates social reward and punishment in rhesus macaques

Background: Serotonin signaling influences social behavior in both human and nonhuman primates. In humans, variation upstream of the promoter region of the serotonin transporter gene (5-HTTLPR) has recently been shown to influence both behavioral measures of social anxiety and amygdala response to social threats. Here we show that length polymorphisms in 5-HTTLPR predict social reward and punishment in rhesus macaques, a species in which 5-HTTLPR variation is analogous to that of humans. Methodology/Principal Findings: In contrast to monkeys with two copies of the long allele (L/L), monkeys with one copy of the short allele of this gene (S/L) spent less time gazing at face than non-face images, less time looking in the eye region of faces, and had larger pupil diameters when gazing at photos of a high versus low status male macaques. Moreover, in a novel primed gambling task, presentation of photos of high status male macaques promoted risk-aversion in S/L monkeys but promoted risk-seeking in L/L monkeys. Finally, as measured by a "pay-per-view" task, S/L monkeys required juice payment to view photos of high status males, whereas L/L monkeys sacrificed fluid to see the same photos. Conclusions/Significance: These data indicate that genetic variation in serotonin function contributes to social reward and punishment in rhesus macaques, and thus shapes social behavior in humans and rhesus macaques alike. © 2009 Watson et al.

Valuing ecosystem services from wetlands restoration in the Mississippi Alluvial Valley

This study assesses the value of restoring forested wetlands via the U.S. government's Wetlands Reserve Program (WRP) in the Mississippi Alluvial Valley by quantifying and monetizing ecosystem services. The three focal services are greenhouse gas (GHG) mitigation, nitrogen mitigation, and waterfowl recreation. Site- and region-level measurements of these ecosystem services are combined with process models to quantify their production on agricultural land, which serves as the baseline, and on restored wetlands. We adjust and transform these measures into per-hectare, valuation-ready units and monetize them with prices from emerging ecosystem markets and the environmental economics literature. By valuing three of the many ecosystem services produced, we generate lower bound estimates for the total ecosystem value of the wetlands restoration. Social welfare value is found to be between $1435 and $1486/ha/year, with GHG mitigation valued in the range of $171 to $222, nitrogen mitigation at $1248, and waterfowl recreation at $16. Limited to existing markets, the estimate for annual market value is merely $70/ha, but when fully accounting for potential markets, this estimate rises to $1035/ha. The estimated social value surpasses the public expenditure or social cost of wetlands restoration in only 1 year, indicating that the return on public investment is very attractive for the WRP. Moreover, the potential market value is substantially greater than landowner opportunity costs, showing that payments to private landowners to restore wetlands could also be profitable for individual landowners. © 2009 Elsevier B.V.

Where does energy R&D come from? Examining crowding out from energy R&D

Recent efforts to endogenize technological change in climate policy models demonstrate the importance of accounting for the opportunity cost of climate R&D investments. Because the social returns to R&D investments are typically higher than the social returns to other types of investment, any new climate mitigation R&D that comes at the expense of other R&D investment may dampen the overall gains from induced technological change. Unfortunately, there has been little empirical work to guide modelers as to the potential magnitude of such crowding out effects. This paper considers both the private and social opportunity costs of climate R&D. Addressing private costs, we ask whether an increase in climate R&D represents new R&D spending, or whether some (or all) of the additional climate R&D comes at the expense of other R&D. Addressing social costs, we use patent citations to compare the social value of alternative energy research to other types of R&D that may be crowded out. Beginning at the industry level, we find no evidence of crowding out across sectors-that is, increases in energy R&D do not draw R&D resources away from sectors that do not perform R&D. Given this, we proceed with a detailed look at alternative energy R&D. Linking patent data and financial data by firm, we ask whether an increase in alternative energy patents leads to a decrease in other types of patenting activity. While we find that increases in alternative energy patents do result in fewer patents of other types, the evidence suggests that this is due to profit-maximizing changes in research effort, rather than financial constraints that limit the total amount of R&D possible. Finally, we use patent citation data to compare the social value of alternative energy patents to other patents by these firms. Alternative energy patents are cited more frequently, and by a wider range of other technologies, than other patents by these firms, suggesting that their social value is higher. © 2011 Elsevier B.V.

Decision making across social contexts: Competition increases preferences for risk in chimpanzees and bonobos

Context can have a powerful influence on decision-making strategies in humans. In particular, people sometimes shift their economic preferences depending on the broader social context, such as the presence of potential competitors or mating partners. Despite the important role of competition in primate conspecific interactions, as well as evidence that competitive social contexts impact primates' social cognitive skills, there has been little study of how social context influences the strategies that nonhumans show when making decisions about the value of resources. Here we investigate the impact of social context on preferences for risk (variability in payoffs) in our two closest phylogenetic relatives, chimpanzees, Pan troglodytes, and bonobos, Pan paniscus. In a first study, we examine the impact of competition on patterns of risky choice. In a second study, we examine whether a positive play context affects risky choices. We find that (1) apes are more likely to choose the risky option when making decisions in a competitive context; and (2) the play context did not influence their risk preferences. Overall these results suggest that some types of social contexts can shift patterns of decision making in nonhuman apes, much like in humans. Comparative studies of chimpanzees and bonobos can therefore help illuminate the evolutionary processes shaping human economic behaviour. © 2012 The Association for the Study of Animal Behaviour.

Economic and social upgrading in global production networks: A new paradigm for a changing world

A key challenge in promoting decent work worldwide is how to improve the position of both firms and workers in value chains and global production networks driven by lead firms. This article develops a framework for analysing the linkages between the economic upgrading of firms and the social upgrading of workers. Drawing on studies which indicate that firm upgrading does not necessarily lead to improvements for workers, with a particular focus on the Moroccan garment industry, it outlines different trajectories and scenarios to provide a better understanding of the relationship between economic and social upgrading. The authors 2011 Journal compilation © International Labour Organization 2011.

Global value chains and agrifood standards: challenges and possibilities for smallholders in developing countries.

The rise of private food standards has brought forth an ongoing debate about whether they work as a barrier for smallholders and hinder poverty reduction in developing countries. This paper uses a global value chain approach to explain the relationship between value chain structure and agrifood safety and quality standards and to discuss the challenges and possibilities this entails for the upgrading of smallholders. It maps four potential value chain scenarios depending on the degree of concentration in the markets for agrifood supply (farmers and manufacturers) and demand (supermarkets and other food retailers) and discusses the impact of lead firms and key intermediaries on smallholders in different chain situations. Each scenario is illustrated with case examples. Theoretical and policy issues are discussed, along with proposals for future research in terms of industry structure, private governance, and sustainable value chains.