© Peter Dicken 2015
‘Capturing Value’ Within Global
Production Networks
Global Shift
Chapter 8
Review
• 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
influences
– the TNC’s strategy
– characteristics of local economy
– time
• Criticism: many TNCs procure only low-level inputs from local
sources
• 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
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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
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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
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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