Global Value Chains, ‘In-Out-In’ Industrialization, and the Global Patterns of Sectoral Value Addition

Abstract

Since the emergence and diffusion of regional and global value chains, production-chain development has always played a key role in shaping countries’ structural transformation. Over the years, the geographical breadth, length, and depth of these chains have changed significantly. Building on the catching-up experience of South Korea and China, this chapter investigates the conditions and processes under which today’s catching-up economies can benefit from integrating into global value chains (GVCs). The chapter empirically documents how successful catching-up has been associated with an ‘in-out-in’ industrialization process of GVC integration, where countries first ‘couple’ by entering GVCs in low value-added segments, then ‘decouple’ by building domestic supply chains and upgrading existing local capabilities, and finally ‘recouple’ by performing high value-addition activities in GVCs. The chapter also assesses the extent to which middle-income countries like South Africa have managed to increase their sectoral value addition in this global production settlement over the last two decades. The chapter finds that today’s middle-income countries have experienced different fortunes at the country and sectoral level when it comes to increasing domestic value addition. The chapter concludes by reflecting on possible future scenarios arising in the post-Covid-19 international context and the emergence of potential new industrialization models.

Reexamining the Impact of Global Value Chain Participation on Regional Economic Growth: New Evidence Based on a Nonlinear Model and Spatial Spillover Effects with Panel Data from Chinese Cities

“…However, the purpose of this independent phase is not to disengage from the global market but to achieve industrial upgrades and economic growth, thus laying the foundation for future reintegration into the GVC. During this stage, reducing the FVAR (and increasing the DVAR) and strengthening independent technological innovations is conducive to economic growth [14], helping developing countries or regions break free from the dilemma of "low-end lock-in" and the "middle income trap" [83], and thus enabling a transition to the third stage.…”