World Bank, 25th July 2011 1

Global Value Chains

Meet Innovation Systems:

Are There Learning Opportunities for

Developing Countries?

Carlo Pietrobelli Inter-American Development Bank

&

Roberta RabellottiUniversità del Piemonte Orientale

Agenda• Global Value Chain framework:

– Focus on the role of leading firms and inter-firm networks in

upgrading;

– Limitation: little attention on the understanding of the

upgrading itself. How is knowledge accessed? How firms in

GVC learn and innovate?

• Innovation Systems framework:

– Focus on how interactions among enterprises, institutions,

research bodies and policy making agencies contribute to

learning and innovation within firms;

– Limitation: little attention to external linkages in the

generation and diffusion of knowledge and innovation;

• IS & GVC: two separate strands of literature: our paper

aims to create a bridge between these two frameworks.

GVCs supportfirms’ learning and

innovation

GVCs contribute to improve the IS

The IS influences the decision of how a GVC interacts with its local suppliers

GVCs and IS: an endogenous relationship

4

The research questions• How do different learning mechanisms operate in different

types of chains?

• In which chains are lead firms promoting learning only through increased pressure (‘competition effect)?

• In which ones are lead firms supporting the innovation process through deliberate knowledge transfer and direct involvement in the learning and innovation process?

• In which type of chains is learning resulting from unintended knowledge spillovers?

• How do different innovation systems affect the determinants of GVC governance and through this, the opportunity for enterprise learning and upgrading?

Gereffi, Humphreys & Sturgeon (2005)

• 3 factors affect governance choice:

– Complexity of transactions;

– Ability to codify transactions;

– Capabilities of suppliers;

• 5 governance types: market, modular, relational, captive and hierarchy.

Learning mechanisms within GCV

vary according to the form of GVC governance

Network

org.

forms

There are multiple forms of interaction between IS, GVC

governance and suppliers’ learning mechanisms

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Complexity of transactions & IS

• In well functioning IS the costs of transactions are low

and relational forms of governance more likely;

• Example: Taiwan where the development of an

efficient IS has supported the transition from hierarchy

and captive chains led by foreign leaders to local

innovation and functional upgrading and value chains

led by domestic firms;

• The establishment of relational value chains is

facilitated by the presence of active technical bodies

where the chain leaders and their local partners may

meet easing the exchange of their complementary

knowledge and reducing the complexity of

transactions. This is common in clusters.

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Codification of transactions & IS

• Well functioning standards and metrology organizations facilitate the handling of complex transactions and modular chains are more likely to prevail;

• Example: learning to comply with standards the Chilean salmon industry has achieved the involvement of local firms both as value chain leaders and qualified suppliers in foreign-led chains. In this process, a meso-level institution, the Association of Salmon Industries, played a crucial role.

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Suppliers’ competence & IS

• Increasing capabilities in the supply-base help to push the architecture of GVC away from hierarchy and captive networks and towards more relational and modular chains;

• Example: Italy where “advanced”subcontracting firms show a high level of TFP (Giunta et al, 2011);

• Other examples: wine in Chile and software in Bangalore, India.

Learning across different chains & IS

• Taiwan: firms have leveraged technological competences across chains (e.g. from TV screen to PC monitors);

• Brazil (Sinos Valley): suppliers have learned how to produce export quality shoes in the US market chain and then started to sell independently designed shoes in the domestic and regional chains;

• A well functioning IS may support the diversification into alternative VCs through mechanisms of learning from one chain to the other (i.e. subcontracting exchange schemes, supplier fairs and exhibitions).

Conclusions

• Governance patterns in GVC are dynamic and subject to continuous adjustments and changes;

• The characteristics of the IS affect this evolution and therefore have an impact on firms’ learning opportunities;

• More empirical research is needed to explore the co-evolving link between GVC and IS;

• Two main challenges ahead: data availability and new policy instruments.

THANK YOUPietrobelli C & Rabellotti R. (2011)

“Global Value Chains Meet Innovation Systems: Are There

Learning Opportunities for Developing Countries?”,

World Development Vol. 39, No. 7, pp. 1261–1269.

carlop@iadb.org

roberta.rabellotti@eco.unipmn.it

For related works visit:

http://sites.google.com/site/robertarabellotti/home

www.pietrobelli.tk