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Upgrading in Global Production Networks: State of the art

Presented at the Global Production Networks Centre at NUS (GPN@NUS) Launch Workshop, 26-27 January 2015 National University of Singapore. Upgrading in Global Production Networks: State of the art. Stefano Ponte Professor of International Political Economy Department of Business and Politics

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Upgrading in Global Production Networks: State of the art

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  1. Presented at the Global Production Networks Centre at NUS (GPN@NUS) Launch Workshop, 26-27 January 2015 National University of Singapore Upgrading in Global Production Networks: State of the art Stefano Ponte Professor of International PoliticalEconomy Department of Business and Politics Copenhagen Business School sp.dbp@cbs.dk

  2. Why are GPNs important? GPNs can lower barriers to entry for developing country producers and service providers and open up specialized industry segments for export • do not necessarily need to build a whole industry back-to-front But also risks of • exclusion, marginalization • inequality, social polarization • immiserizing growth • increasing economic activity with declining real incomes

  3. Key debates Governance of GPNs Challenges and opportunities in GPN participation Geographic configurations Institutional frameworks Upgrading

  4. Source: UNCTAD 2013: 22

  5. Source: UNCTAD 2013: 23

  6. Upgrading • Improve value addition • Classic distinction: • Process upgrading • Product upgrading • Functional upgrading • Inter-chain upgrading

  7. Smile-curve of value added Baldwin et al 2014

  8. Upgrading (cont) Also important: • Volume • economies of scale • Portfolios of qualities • economies of scope • Other valorization processes • Fair trade, geographic indications, branding Some trajectories actually involve downgrading as well • Important in periods of crisis

  9. What factors explain upgrading trajectories?Case study of aquaculture GPNs in Asia EU-funded research project (SEAT) Aquaculture production networks originating in Asia • Tilapia, shrimp, prawns, pangasius • China, Vietnam, Thailand, Bangladesh • Focus on production and processing nodes Upgrading in terms of: • Improving product, process, volume and/or variety (in the same node of the GPN) • Changing and/or add functions (up- or downstream; in several nodes)

  10. GPN governance and upgrading

  11. Public sector support and upgrading

  12. Upgrading: New analytical frontiers Social upgrading • Capturingthegains.org • ILO ‘better work’ framework Environmental upgrading • Minimizing the environmental impact of production • with equal or improved economic performance • energy savings, new materials, new systems • Driving forces • limits of buyer-driven greening • ecolabels • Transmission mechanisms

  13. Conclusion • Opportunities and challenges in: • GPN participation • Economic, social and environmental upgrading • Upgrading answer is not always in ‘trading up’ • volume still important, wider portfolios (including lower quality), emerging markets and end-market diversification • Regulation and public sector support • Important, but helps mostly product and process upgrading • Needs to be devised in view of actual functioning and governance of value chains

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