Global Value Chains and Technological Capabilities: A Framework to Study Learning and Innovation in Developing Countries

Abstract

This paper presents a critical review of the global value chain (GVC) literature in light of the “technological capabilities” approach to innovation in less-developed countries (LDCs). Participation in GVC is beneficial for firms in LDCs, which are bound to source technology internationally. However, the issues of learning and technological efforts at the firm level remain largely hidden in the GVC literature. We propose a shift in the empirical and theoretical agenda, arguing that research should integrate the analysis of the endogenous process of technological capability development, including specific firm-level efforts, and of the mechanisms allowing knowledge to flow within and between different global value chains into the GVC literature.

Business Constraints and Growth Potential of Micro and Small Manufacturing Enterprises in Uganda

“…At the macro level, the traditional approach to growth associates national or regional economic growth with capital accumulation (level of investment in physical assets). In the global value chain literature, it is argued that technical upgrading (that is, investment in modern technology) is among the ways to increase firms' competitiveness in the global market (Schmitz 2004;Morrison, Pietrobelli and Rabellotti 2006). Following the argument by Reinikka and Svensson (2001), factors that constrain firms' investment consequently limit their growth.…”

“…This can be done by enhancing the availability of production equipment and spares in the local market and through the provision of technical services at favorable rates. On the other hand, MSEs may need to try to become integrated in global value chains in order to obtain better access to technology, knowledge, managerial skills, and also export markets (Ishengoma and Kappel 2007;Keller 2004;Morrison, Pietrobelli and Rabellotti 2006;Antràs and Helpman 2004). MSEs may also have to be trained regarding the need to upgrade their productive assets.…”

Global Value Chains Meet Innovation Systems: Are There Learning Opportunities for Developing Countries?

“…A small number of developing countries have begun to make the difficult transition from being economically successful in industrial production to building innovation capabilities (Schmitz and Strambach, 2009). Thus, China and India, or some parts of these countries, have very similar innovation systems to those in developed countries and in some sectors are a world class standard (Altenburg, Schmitz and Stamm, 2008 (Morrison, Pietrobelli and Rabellotti, 2008).…”

“…The challenge is not always about moving into more advanced functions but is often about deepening the specific capabilities required to explore new opportunities in the value chain stage in which the firm is currently engaged (Morrison et al, 2008). Moving from exploitation of natural resources to manufacturing, packaging, distributing and branding can be described as climbing the ladder.…”

Supplier strategies to compensate for knowledge asymmetries in buyer-supplier relationships: implications for economic upgrading

“…Also, with their limited resources, the suppliers could only access information-oriented or publicly available explicit knowledge, which only enabled them to improve technocratic or output-oriented dimensions of process upgrading. Such knowledge did not allow them to 'deepen' their upgrading initiatives (such as through workers' skills development), let alone 'climb the ladder' (such as by becoming an ODM or OBM service provider) (Morrison et al, 2008).…”