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 5: The underground revolution in the Sinos Valley: a comparison of upgrading in global and national value chains

Luiza Bazan and Lizbeth Navas-Alemán

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


Luiza Bazan and Lizbeth Navas-Alemán 1. INTRODUCTION The recent debate on global value chains has been concerned with the influence of global buyers on the prospects for manufacturers in developing countries. Gereffi (1999), the pioneer of this literature, has defined value chain governance as the coordination of different and dispersed activities involved in a chain. Since these activities aggregate different value at each stage, being the governor in a value chain ultimately implies deciding who in the chain performs the better remunerated activities as well as the less lucrative ones. Thus, it is clear that the implications of chain governance go far beyond merely organizing activities: governance is intimately linked with upgrading and the distribution of gains along the chain. While the global chain literature emphasizes that the upgrading prospects of local producers are determined from outside the locality, the cluster literature suggests that advances in upgrading depend above all on relationships within the locality. Particular attention is given to cooperation between local producers and to the role of public and private support services (Nadvi, 1997; Rabellotti, 1997; Schmitz, 1995). However, this body of literature has increasingly acknowledged the need to include external linkages in the analysis of upgrading processes (Nadvi and Schmitz, 1999). In this chapter we combine the value chain and cluster approaches to answer the following questions: What type of chain do local firms operate in? Does the type of chain have an influence on their upgrading? What is the scope...

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