Issues of Governance and Upgrading
Edited by Hubert Schmitz
4. 1. Governance in global value chains 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)...
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