Chapter 11. Rwanda and West Bengal, India—A comparative analysis of firm dynamics in global value chains

Summary

This case study investigates the role of foreign direct investment (FDI) in the global value chain (GVC) participation of Rwanda and West Bengal, India. It analyzes the dynamics of multinational corporations (MNCs) and domestic firms across different GVC archetypes. The chapter first shows the current GVC participation and FDI performance of Rwanda and West Bengal, India. Next, it sets out the various approaches used in this chapter. Subsequently, it briefly explores the relationship between FDI inflows and GVC participation. It then considers the position and role of MNCs in production networks across different GVCs. Finally, it explores the firm characteristics that may predict domestic firms’ GVC participation and considers how GVC participation affects firm performance.

Current global value chain participation and foreign direct investment performance of Rwanda and West Bengal

This study focuses on a single sector in each of the six GVC archetypes for both countries based on the size and importance of sectors in each country’s economy. Table 11.1 shows focus sectors for each country and each archetype. The services sectors in West Bengal are not considered because data were unavailable.

Rwanda’s global value chain and foreign direct investment performance

Using Rwandan customs data, figure 11.1 shows the contribution of the exporting firms in the four goods sectors to Rwanda’s total export volume over the period 2008–17. As is evident from this illustration, firms in the four focus sectors in goods GVCs contribute significantly to Rwanda’s export basket, with commodities (coffee and tea) being the largest foreign exchange earner in Rwanda’s goods export portfolio. In 2017, the four goods GVCs together accounted for roughly one-third of total exports. Whereas agriprocessed goods as well as textiles, apparel, and leather have been a part of Rwanda’s export mix for many years, the exporting of pharmaceuticals and chemicals is a relatively new occurrence.

Tourism makes up close to half of all services exports using the set of firms in the data set. Tourism exports in 2017 were higher than textiles, apparel, and leather; processed foods;