Capability Matrix : A Framework for Analyzing Capabilities in Value Chains

This paper develops a Capability Matrix for analyzing capabilities of developing country firms that participate in global and national value chains. This is a generic framework to capture firm-level knowledge accumulation in the context of global and local industrial constellations, by integrating key elements of the global value chain (GVC) and technological capabilities (TC) approaches. The framework can visually portray characteristics of firms’ capabilities, and highlight a relatively overlooked factor in the GVC approach: local firms’ endogenous learning efforts in varieties of relationship with lead firms.

Innovating global value chains : creation of the netbook market by Taiwanese firms

This paper explores the process of creation of the netbook market by Taiwanese firms as an example of a disruptive innovation by latecomer firms. As an analytical framework, I employ the global value chain perspective to capture the dynamics of vertical inter-firm relationships that drive some firms in the chain to change the status quo of the industry. I then divide the process of the emergence of the netbook market into three consecutive stages, i.e. (1) the launch of the first-generation netbook by a Taiwanese firm named ASUSTeK, (2) the response of the two powerful platform leaders of the industry, Intel and Microsoft Intel, to ASUSTeK’s innovation, and (3) the market entry by another powerful Taiwanese firm, Acer, and explain how Taiwanese firms broke the Intel-centric market and tapped into the market-creating innovation opportunities that had been suppressed by the two powerful platform leaders. I also show that the creation of the netbook industry was an evolutionary process in which a series of responses by different industry players led to changes in the status quo of the industry.

Measuring global value chains and regional economic integration : an international input-output approach

Firms that are expanding their cross-border activities, such as vertical specialization trade, outsourcing, and fragmentation productions, have brought dramatic changes to the global economy during the last two decades. In an attempt to understand the evolution of the interaction among countries or country groups, many trade-statistics-based indicators have been developed. However, most of these statistics focus on showing the direct trade-specific-relationship among countries, rather than considering the roles that intercountry and interindustrial production networks play in a global economy. This paper uses the concepts of trade in value added as measured by the input–output tables of OECD and IDE-JETRO to provide alternative indicators that show the evolution of regional economic integration and global value chains for more than 50 economies. In addition, this paper provides thoughts on how to evaluate comparative advantages on the basis of value added using an international input–output model.

China's regional economies and value chains : an interregional input-output analysis

Attempts to understand China’s role in global value chains have often noted the case of Apple's iPhone production, in particular the fact that the value added during the Chinese portion of the iPhone’s supply chain is no more than 4%. However, when we examine the Chinese economy as a whole in global production networks, China’s share in total induced value added by China’s exports of final products to the USA is about 75% in 2005. This leads us to investigate how Chinese value added is created and distributed not only internationally but also domestically. To elucidate the increasing complexity of China’s domestic production networks, this paper focuses on the measure of Domestic Value Chains (DVCs) across regions and their linkages with global markets. By using China’s 1997 and 2007 interregional input-output tables, we can understand in detail the structural changes in domestic trade in terms of value added, as well as the position and degree of participation of different regions within the DVCs.

How are global value chains fragmented and extended in China's domestic production networks?

Global value chains are supported not only directly by domestic regions that export goods and services to the world market, but also indirectly by other domestic regions that provide parts, components, and intermediate services to final exporting regions. In order to better understand the nature of a country’s position and degree of participation in global value chains, we need to more fully examine the role of individual domestic regions. Understanding the domestic components of global supply chains is especially important for large developing countries like China and India, where there may be large variations in economic scale and development between domestic regions. This paper proposes a new framework for measuring domestic linkages to global value chains. This framework measures domestic linkages by endogenously embedding a country’s domestic interregional input-output (IO) table in an international IO model. Using this framework, we can more clearly describe how global production is fragmented and extended through linkages across a country’s domestic regions. This framework will also enable us to estimate how value added is created and distributed in both domestic and international segments of global value chains. For examining the validity and usefulness of this new approach, some numerical results are presented and discussed based on the 2007 Chinese interregional IO table, China customs statistics at the provincial level, and World Input-Output Tables (WIOTs).

Platforms and firm capabilities : a study of emerging global value chains

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 market 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.

Tracing CO2 emissions in global value chains

This paper integrates two lines of research into a unified conceptual framework: trade in global value chains and embodied emissions. This allows both value added and emissions to be systematically traced at the country, sector, and bilateral levels through various production network routes. By combining value-added and emissions accounting in a consistent way, the potential environmental cost (amount of emissions per unit of value added) along global value chains can be estimated. Using this unified accounting method, we trace CO2 emissions in the global production and trade network among 41 economies in 35 sectors from 1995 to 2009, basing our calculations on the World Input–Output Database, and show how they help us to better understand the impact of cross-country production sharing on the environment.

Establishing global value chains through the liberalization of trade in services

This paper addresses the importance of establishing global value chains through the liberalization of trade in services. A database has revealed rather disconnected policy arrangements across APEC members in terms of service trade liberalization. While the economic benefits arising from harmonized and liberalized policy across APEC members are widely recognized in the business sector, relevant policy coordination seems to be missing. With this in mind, APEC could work on establishing its own harmonized "service trade commitment table" that would be centered on simple foreign capital participation criteria. This would surely contribute to forming an APEC-wide global value chain.

Measuring smile curves in global value chains

The concept and logic of the "smile curve" in the context of global value chains has been widely used and discussed at the individual firm level, but rarely identified and investigated at the country and industry levels by using real data. This paper proposes an idea, based on an inter-country input-output model, to consistently measure both the strength and length of linkages between producers and consumers along global value chains. This idea allows for better identification and mapping of smile curves for countries and industries according to their positions and degrees of participation in a given conceptual value chain. Using the 1995-2011 World Input-Output Tables, several conceptual value chains are investigated, including exports of electrical and optical equipment from China and Mexico and exports of automobiles from Japan and Germany. The identified smile curves provide a very intuitive and visual image, which can significantly improve our understanding of the roles played by different countries and industries in global value chains. Further, the smile curves help identify the benefits gained by these countries and industries through their participation in global trade.

Effects of RoHs and REACH regulations on firm-level production and export, and the role of global value chains : the cases of Malaysia and Vietnam

This paper uses firm-level data to examine the impact of foreign chemical safety regulations such as RoHS and REACH on the production costs and export performance of firms in Malaysia and Vietnam. This paper also investigates the role of global value chains in enhancing the likelihood that a firm complies with RoHS and REACH. We find that in addition to the initial setup costs for compliance, EU RoHS (REACH) implementation imposes on firms additional variable production costs by requiring additional labor and capital expenditures of around 57% (73%) of variable costs. We also find that compliance with RoHS and REACH significantly increases the probability of export and that compliance with EU RoHS and REACH helps firms enter a greater variety of countries. Furthermore, firms participating in global value chains have higher compliance with RoHS and REACH regulations, regardless of whether the firm is directly exporting, when the firm operates in upstream or downstream industries of the countries' supply chain.

A globális értékláncok – a multinacionális vállalat, mint globális gyár. Fejezetek a nemzetközi üzleti gazdaságtanból 6. ----- It's title in English: Global Value Chains – Multinational Enterprise as Global Factory. Chapters from International Business 6

A tanulmánykötet a globális értékláncok névvel fémjelezett jelenséget veszi górcső alá. A fókuszban a multinacionális vállalatcsoportok ill. a nemzetközi cégek állnak. A tíz tanulmány különböző megközelítések alapján betekintést ad abba, hogy hogyan ragadhatják meg és vizsgálhatják a kutatók a globális értékláncokat a vállalatok, ill. vezetőik nézőpontjából, mi következik a kutatási eredményekből a vállalatok vezetői számára, és milyen következményei vannak a globális értékláncok karakteres és terjedő jelenlétének a nemzetgazdaságok gazdasági politikáit formálókra. A tanulmánykötet szerzői a 2012/2013.tanév tavaszi félévében a Nemzetközi üzleti gazdaságtan c. PhD kurzus hallgatói voltak. ______ The working paper is to provide a Hungarian language overview on the research finding s on Global Value Chain and global factory. The phenomenon behind them is recognized but under researched in Hungary. The chapters of the working paper are to cover as many angles and perspectives of Global Value Chain as many it is possible. Each chapter is based on a published English language paper. Theoretical and conceptual issues, considerations of MNEs and small- and medium sized enterprises and that of national policies are discussed. Authors of the working paper attended the International Business PhD course in the spring semester of 2012/2013.

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?"