Research Methodology for
Global Business Clusters &
Global Value Chain Networks
Dr. Emanuela Todeva
Director of Research Centre for Business Clusters,
Networks and Economic Development
University of Surrey
Multilateralism & Global Integration
‘The world has become a Hum of Interconnected voices
and a Hive of interlinked lives.’
Christine Lagarde, 4/2/2014
• In 1950 – the emerging markets and developing
economies accounted for hardly 25% of the Global GDP
– now it is 50%, and in 2020 it is likely to be 2/3
• More then half of manufacturing output are intermediate
products
• More then 70% of integrated services (imports) are
intermediate services
• MNCs control 2/3 of global trade
• 12 MNCs 31 Global cities sit among the top 100 global
bodies in terms of size
The Value Chain Describes the Full Range of
Activities That Firms and Workers Do to Bring a
Product From its Conception to its End Use
Network Approach to Value
Management
value-inexchange
value
creation
value
measurement
value
diffusion
value
extraction
value
co-creation
value-incontext
© Todeva, 2014
GVC – Interconnected Input-Output Markets for
- resources (supply networks & trade of intermediate products)
- skills (outsourcing networks)
- capital (shareholder networks)
- production technology (R&D alliances)
GVC – Organisation & Coordination
of production and value added activities
across borders and firm boundaries
GVC – Interconnected Organised Production
Value Chains
Capabilities and Country Resources
-
Agents boundaries
Location boundaries
Activities
Costs
Value added
Transfers, transactions
Value Added Along the GVC
(OECD, 2013)
apparel supply chain: Forstater, 2010
Methodology as a Step-byStep Approach
• Cluster Mapping
• Cluster Development
(enhancement of
capabilities)
• Cluster
Internationalisation
• Revealing actors &
activities
• Revealing linkages
• Visualising / Mapping
linkages
• Developing linkages
• Upgrading linkages &
Position
UPGRADING
through innovation to increase value added
Different forms of upgrading:




of processes
of products
functional
inter-sectoral
Process Upgrading
Firms can upgrade processes –
transforming inputs into outputs more
efficiently by re-organising the production
system or introducing superior technology
(i.e. footwear producers in the Synos Valley – Schmitz, 1999).
Product Upgrading
Firms can upgrade by moving into
more sophisticated product lines
(which can be defined in terms of
increased unit values).
Example: the apparel commodity chain
in Asia upgrading from discount chains
to department stores (Gereffi, 1999).
Functional Upgrading
Firms acquire new functions (or abandon
existing functions) so that they increase the
overall skill content of their activities. They
might complement production with design or
marketing, or move out of low-value production
activities.
Example: Torreon’s blue jeans industry
upgrading from maquila to “full-package”
manufacturing (Bair & Gereffi, 2001).
Upgrading
Upgrading refers to the acquisition of technological capabilities and
market linkages that enable firms to improve their competitiveness and
move into higher-value activities. Analyses of upgrading from a value chain
perspective pay particular attention to the ways in which value chain
linkages facilitate or obstruct upgrading.
 Product & Process
Upgrading
 Functional
Upgrading
 Inter-Chain
Upgrading
Intersectoral Upgrading
Firms may apply the competence acquired
in a particular function to move into a new
sector.
For example, in Taiwan competence in
producing TVs is used to make monitors
and thus move into the computer sector
(Humphrey & Schmitz, 2002, Guerrieri & Pietrobelli, 2004).
The Value Chain Describes the Full Range of
Activities That Firms and Workers Do to Bring a
Product From its Conception to its End Use
- The Use of complementary databases comprising of the
entire population of firms and funded research projects
- Developed a Multi-Stage Cluster Methodology for Cluster
mapping and analysis
- Investigating Brokerage, Intermediation, & Information
sharing across firm / regional / country boundaries
Bio-Medical & Health,
Greater South East, 2008
61
Universities /
centres of excellence
in research
Activities &
Transactions
63
3208
1154
Medical Care
Support Services
Telecare
Social Care
240
Diagnostics
4902
Medical Care
478
Dental Practice
Amadeus 2008
265
Technical
Support
719
Medical
Devices
376
Database Firms
‘Concentration of firms
in the Value Chain in
the Region’
Greater South East, UK
813
Trade
Medical & Optical
Products
677
Health products
& cosmetics
Drug Development
Support
286
Bio-Pharma
Manufacturing
387
Bio-pharma
R&D
Fitness &
Wellbeing
611
Trade
Pharmaceutical
& bio-products
Pharmacies
& Drug Stores
Integrated Pharma
& Biotech
Bio-Pharma Support
496
309
1161
115
© Todeva, 2008
Cluster Value Chain: SURGICAL & MEDICAL INSTRUMENTS MANUFACTURING
(198 firms, ties between firms based on 5 or more shared industry codes)
(87% of firms have the core industry codes: 334510 Electro-medical and Electrotherapeutic Apparatus Manufacturing; 334517 Irradiation
Apparatus Manufacturing; 39112 Surgical and Medical Instrument Manufacturing; 339113 Surgical Appliance and Supplies Manufacturing)
All other personal
care stores
R&D
Plastic
products
198 firms
87% in 4 core
industries
Misc electrical
equip & component
manuf.
Holding
companies
Misc. metal
products
Electro-medical, electrotherapeutic, irradiation
apparatus; surgical &
medical instruments;
surgical supplies
manufacturing
Wholesale
© Todeva (2007)
The Global Information Sector, 2002
Motion picture
Business services
Computer systems
sPublishing
Publishing
Electronic hardware
Telecom operations
© E. Todeva (2004)
The Emergence /Recognition of
GVCs and Major Paradigm Changes
(Cattaneo et al 2013)
•
Change of relevant strategic framework, from countries to firms
and GVCs.
–
–
–
•
A country cannot develop a competitive offer of goods or services in
isolation.
Imports are a means for firms to access the most efficient inputs and
free resources to focus on core competences.
Following business practices, policy should treat trade and FDI, both
inward and outward, in an integrated framework.
Change of the relevant economic framework, from industries to
tasks and business functions. The objective is not to develop
domestic industries that would capture all the segments of
production or the whole value chain, but to develop value added
services and inputs for the GVC
–
Acknowledge that an efficient manufacturing sector requires efficient
and competitive services as well as a skilled workforce and continuous
innovation in products, processes and business models. Services such
as financial intermediation, R&D, logistics, and marketing are necessary
to produce higher value added manufactures.
The Global Value Chain (GVC)
•
•
•
Outward-looking development model driven by trade and
competitiveness.
– Countries / Regions / Firms do not need to develop vertically
integrated industries to participate in global trade; it is enough
to develop capacities in specific segments (stages of
production, tasks or business functions) of the value chain.
(Cattaneo et al., 2013)
Trade in Value-Added (TiVA) indicators (OECD/WTO, 2013)
– Focus on the estimation of the source(s) of value (domestic vs.
foreign and/or by country and industry) that is added in
producing goods and services for export.
– Still involves misleading classifications such as in the chemical
sector in the TiVA tables can combine both base chemicals and
pharmaceutical products. These subsectors differ in their use
of intermediate products as well as their skill intensity.
The GVC Participation Index
– The higher the foreign value-added embodied in gross exports
and the higher the value of inputs exported to third countries
and used in their exports, the higher the participation of a given
country in the value chain.
Louis Brennan , 2014
Moving Up the Value Chain
• (1) Upgrading
Process upgrading
Product upgrading
Functional upgrading
Chain or inter-sectoral upgrading
• (2) Task bundling
• (3) Workforce development and innovation
• (4) Ensuring cost competitiveness
• (5) Improving the connectivity with international markets
• (6) Improving business and investment climates
• (7) Fostering innovation and building capacity
Composition of Mexico’s Exports to the World Market, 1986-2006
60
Primary Products
Resource Based Manufactures
Low Tech Manufactures
50
Medium Tech Manufactures
High Tech Manufactures
% Export Market
40
30
20
10
0
Total
1986
1988
1990
1992
1994
1996
Exports
US $B 19 21 20 23 26 27 46 52 61 80 96
1998
2000
2002
2004
2006
110 117 136 166 158 161 165 188 214 250
Source: UN Comtrade.
28
Composition of China’s Exports to the World Market, 1987-2006
60
Primary Products
Resource Based Manufactures
Low Tech Manufactures
50
Medium Tech Manufactures
High Tech Manufactures
% Export Market
40
30
20
10
0
Total
Exports
US $B
1987
39
1989
48
53
1991
62
72
1993
85
92
1995
1997
1999
2001
2003
2005
121 149 151 183 184 195 249 266 326 438 593 762 969
Source: UN Comtrade.
Africa’s Share of World
Exports Has Been Declining
Main Competitors in the U.S. Market for Automatic Data Processing Machines and Units
(SITC 752)
60%
China
50%
Malaysia
Percent of U.S. Market
Mexico
Thailand
Singapore
40%
Japan
30%
20%
10%
0%
2000
2001
2002
2003
2004
2005
Year
Source: USITC http://dataweb.usitc.gov downloaded Feb 22, 2008
2006
2007
Main Competitors in the U.S. Market for Telecommunication Equipment and Parts
(SITC 764)
40%
China
Mexico
Korea
Japan
Percent of U.S. Market
30%
Malaysia
Canada
20%
10%
0%
2000
2001
2002
2003
2004
2005
2006
2007
Year
32
Source: USITC http://dataweb.usitc.gov downloaded Feb 22,
2008
Main Competitors in the U.S. Market for Furniture and Parts
(SITC 821)
50%
China
Canada
Mexico
Vietnam
Italy
Percent of U.S. Market
40%
30%
20%
10%
0%
2000
2001
2002
2003
2004
2005
2006
2007
Year
33
Source: USITC http://dataweb.usitc.gov downloaded Feb 22,
2008
Main Competitors in the U.S. Market for Articles of Apparel and Clothing
(SITC 84)
40%
China
Mexico
Vietnam
Indonesia
India
Percent of U.S. Market
30%
20%
10%
0%
2000
2001
2002
2003
2004
2005
2006
2007
Year
34
Source: USITC http://dataweb.usitc.gov downloaded Feb 22,
2008
MNC R&D Centers in China,
How are engineers being used?
 What kinds of work are Chinese, Indian,
and American engineers actually doing?
• Answer: Not just product adaptation,
but cutting-edge research &
commercialization
 China: More than 1,000 MNC R&D Centers
• GE’s China Technology Center:
Advanced research in energy storage,
environmental management
• Microsoft Research Asia: Cutting-edge
graphics & multimedia research
Global Value Chains
 The focus of analysis of global value chains is on
the relationships among the different actors that
are part of the chain.
 The concept of ‘governance’ ( = coordination) is
fundamental to understand such relationships;
Governance may occur thorugh:
1. Market relations (Arm’s-length)
2. Network relations, that is cooperation among
firms with the same level of power;
3. Quasi-hierarchy, with relations among
enterprises that are legally independent, but one is
hierarchically subordinate to the other;
4. Hierarchy, when a firm is owned by another
(external) firm.
• R&D expenditures by business, government, higher
•
•
•
•
•
education, and private non-profit organizations
Source of funds for R&D, by type of costs, by type
of economic activity (NACE), by enterprise size class,
by type of R&D (basic, applied, and experimental
research) (Timothy J. Sturgeon, May 2013)
Schmitz (1995) - ‘‘collective efficiency’’ (CE) defined as the competitive advantage derived from local
external economies and joint action
Ricardo’s static concept of ‘‘Comparative
Advantage’’ (CA) - registers ex-post gaps in relative
productivity which determine international trade flows
success in firm-level upgrading enables the dynamic
acquisition of competitiveness in new market
niches, sectors, or phases of the productive chain
(Pietrobelli, 1997;Lall, 2001;).
From innovation, to upgrading, to the acquisition of
firm-level competitiveness (i.e., competitive advantage).
R&D Alliance Networks
Competing products
Competing technologies
MNC
Research
laboratory
MNC
Research
laboratory
RESEARCH
CONSORTIUM
Government
innovation policy
agencies
Government
standardisation
agency
subcontractor
Scientific
Association
Scientific and knowledge fields
© Todeva, 2005
International
Standardisation
agency
The Network Diamond
cultural
approach
ACTORS
STRUCTURE
relational
approach
structural
approach
RELATIONSHIPS
Emanuela Todeva (2006) Business Networks: Strategy and Structure, New York: Taylor & Francis.
Conclusions – Supporting Cluster Development & Its
Integration into Global Value Chains Through
Intermediation & Facilitation
•
•
•
•
•
•
•
prioritising and balancing between competition and cooperation
bridging to enhance information transparency of suppliers and contracts
creating effective institutions and intermediation practices
New policy framework that provides incentives for networking & decision support
Contract management support (platform governance & legal representation /
protection)
Strategic alliance management
Market access management
Institutional
Intermediaries
Financial
Intermediaries
e.todeva@surrey.ac.uk
Types of
Intermediaries
Intermediation
theory
Intermediation
Services
Intermediation
Activities
/ Practices
Intermediation
Mechanisms
Intermediation
Channels