Local Enterprises in the Global Economy

Local Enterprises in the Global Economy

Issues of Governance and Upgrading

Edited by Hubert Schmitz

This book opens a fresh chapter in the debate on local enterprise clusters and their strategies for upgrading in the global economy. The authors employ a novel conceptual framework in their research on industrial clusters in Europe, Latin America and Asia and provide new perspectives and insights for researchers and policymakers alike.

Chapter 4: Governance in global value chains

John Humphrey and Hubert Schmitz

Subjects: development studies, development economics, economics and finance, development economics, geography, economic geography, innovation and technology, innovation policy


John Humphrey and Hubert Schmitz* INTRODUCTION Studies of industrial clusters have highlighted the way in which competitive advantage arises from the local organization of firms. Their collective efficiency results from more than agglomeration; the quality of local relationships is also important. Both relationships amongst firms and between firms and support organizations have been a focus of attention. Relationships with agents outside the cluster are given much less attention, or described as predominantly arm’s-length and market-based. Buyers purchase products largely designed and made within the cluster. These buyers appear to have little influence on what products are made, or how they are made. This view of the relationship with the outside world can be questioned even in the context of Italian clusters (see Chapter 6 by Rabellotti, this volume). It would, however, be particularly difficult to sustain this view for developing country clusters which are the subject of several chapters in this book. Analysis of trade in labour-intensive products has highlighted the fact that trade in these products is increasingly organized by global buyers, working or acting on behalf of major retailers or brand-name companies. This has been shown to be the case in, for example, the trade of garments between East Asian countries and the US (Gereffi, 1999), the trade in horticultural products between Africa and the UK (Dolan and Humphrey, 2000) and the trade in footwear from China and Brazil to the US and Europe (Schmitz and Knorringa, 2000). Furthermore, trade in these and other products...

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