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Global Value Chains in a Postcrisis World
Notes 1. U.S. Bureau of Labor Statistics Current Employment Statistics program, http://www.bls.gov/ data/#employment, accessed Janurary 15, 2010. 2. This section draws from Sturgeon and Memedovic (forthcoming). 3. In 1988, only two products likely to be inputs to apparel and footwear products appeared in the top 50, bovine hides and skins (SITC 46) and cotton yarn (SITC 48), comprising 1.9 percent of the value of the top 50 and 0.6 percent of total trade in all manufactured intermediates. By 2006 no apparel inputs ranked among the top 50. The four highest ranked apparel inputs in 2006 were knitted and crocheted fabrics (#94), nonwoven fabrics (#109 out of 1,600), impregnated (waterproof) fabrics (#129), and parts of footwear (#175). 4. For example, in the automotive industry a pattern of regional production has been intensifying since the mid-1980s for both political and technical reasons. This has undoubtedly dampened trade in both final and intermediate goods. Nevertheless, global integration has proceeded at the level of buyersupplier relationships, especially between automakers and their largest suppliers, which have plants in multiple regions. As a result, local, national, and regional value chains in the automotive industry are “nested” within the global organizational structures and business relationships of the largest firms (Sturgeon, Van Biesebroeck, and Gereffi 2008). These relationships structure not only the flow of physical goods, but also the flow of information, instructions, payments, and investment that characterize GVC development. The stable share of automotive parts in total manufactured intermediate goods trade, despite the establishment of dozens of final assembly plants in developing countries over the period (Sturgeon and Florida, 2004), probably reflects the strong drive for local content in this industry, both for regulatory and operations reasons (see Sturgeon, Van Biesebroeck, and Gereffi [2008] for an extended discussion). Similarly, apparel GVCs are highly dynamic, extensive, and robust, even though inputs (for example, fabric, fiber, and other footwear and apparel parts) make up a small fraction of total intermediate goods trade and none of the top 50. While the capacity to produce inputs and final products in developing countries has been growing strongly, orders are highly specific in terms of fabric and other accessories such as buttons and zippers. Design features are most often dictated by global buyers and change constantly as fashions and seasons vary, and deliveries are very timely, coordinated with the needs of retailers. In some cases, store pricing and barcode labels are attached to garments in the factory prior to direct delivery to retail stores. This type of explicit coordination is an important driver of industrial upgrading in developing countries, as suppliers expand their capabilities to meet the demands of global buyers, and is an important determinant for where value is captured in the industry: largely by the brand-carrying firms and large retailers based in industrialized countries. 5. While this risk-taking is a source of lead firms’ advantage over suppliers, lead firms often seek to pass on as much financial exposure to suppliers as possible. One such mechanism is “vendor managed inventory,” where suppliers own the parts until the moment they pass onto the factory floor. 6. Markets associated with specific industrial settings are sometimes referred to as “vertical markets,” including banking, legal and accounting services, airline security, shipping, and so on. 7. Exceptions include Giant Bicycles, which began as a supplier of “private label” bicycles to U.S. retailers like Montgomery Ward and eventually developed its own line of high-quality branded products, and to some extent Acer, which recently surpassed Dell as the number 2 PC brand in the world after Hewlett-Packard, the first brand not based in the United States or Japan to achieve this high market share (Vance 2009). Full success with this supplier-driven upgrading model, however, has been elusive (Sturgeon and Lester 2004). 8. This section draws from Sturgeon, Humphrey, and Gereffi (forthcoming). 9. The opportunity for electronic component distribution in Singapore and Malaysia stemmed from the lack of an adequate conduit to connect local chip assembly and test operations with the growing subassembly and product-level manufacturing that foreign firms were doing in the region. Offshore affiliates of both semiconductor and product-level firms had increased their Asian operations, and Uraco’s new distribution arm helped to connect the dots.