© Peter Dicken 2015
‘Capturing Value’ Within Global
Production Networks
Global Shift
Chapter 8
• Concepts to Review
– GPNs; codified and explicit knowledge;
bargaining between TNCs and local
economies; geographical inequalities;
integration versus responsiveness
• Key Words
– Stakeholders, value, value creation,
knowledge management, labour strategies
Concept of Value
• Definitions
– ‘Economic rent’
– Value is surplus above cost in performing the transformations at
that stage
– Raises issues beyond firm competitiveness and profitability
• GPNs and value
– Value in GPN is created, enhanced and captured where its parts
are located
– A place’s involvement in GPNs creates net benefits/costs
– Concern over firms transferring activities out of home countries
– Defensive investment: taken to protect markets and ensure that
the firm prospers, which consequently helps the domestic firm
Value of a Particular Locality
• A firm’s organizational ecology
– intra-firm relationships
– inter-firm relationships
– firm–place relationships
– place–place relationships
• Dimensions of a place’s involvement:
• Net gain to host country depends on trading practices of TNC
• Local link formation by TNCs depends on three major
– the TNC’s strategy
– characteristics of local economy
– time
• Criticism: many TNCs procure only low-level inputs from local
• Differences between dependent and developmental linkages
Value and Diffusion
• Knowledge Transfer and GPNs
– Knowledge transfer to local population in terms of training
– Does not guarantee that the benefits of this knowledge will be diffused
through the host economy
– The nature of the TNC inhibits the spread of proprietary technologies
– Evidence for technology transfer to developing countries is mixed
– Knowledge transfer requires absorptive capacity on the part of locals
– Both codified and explicit knowledge required for knowledge diffusion
• GPNs and the Host State
– Relative bargaining power of firms versus local economies is crucial
– Balance between creating the right conditions to attract GPNs and tying
oneself too closely to specific GPNs
– Problems of dominance of local economy by foreign-based firms –
although such firms are to some degree necessary
– In such cases non-national goals may become dominant
Value and Employment
Impact of GPNs on Jobs
Local interest is mainly in the effect of GPNs on local jobs
Offset jobs created by the number of jobs displaced by adverse effect on local firms:
NJ = DJ + IJ − DJ
GPN establishment also involves reorganization of home-country operations
Impacts of offshoring include: export-stimulus effect, home office effect, supporting firm effect
and production displacement effect
TNCs and Local Employment
High-road versus low-road job scenarios
Direct versus indirect job creation
Net employment effect: NE = XE + HE + SE − DE
Quantity of jobs, quality of jobs and location of jobs
Exploitation of cheap labour is one of the major charges levelled at TNCs
TNCs and Local Labour Relations
Variation exists in degree of TNC HQ’s involvement in labour relations
Dispersed nature of TNCs makes it difficult for labour to organize against them
Possible counters: global union federations, networks of workers
Contracts: firms differentiating between core and non-core workers