What Opportunities for Developing Countries?

Transcription

1 Global Value Chains and Clusters: What Opportunities for Developing Countries? Carlo Pietrobelli Professor of Economics Director of CREI, University Roma Tre, Italy url: TIPS, Gaborone, 10 Dec

2 Issues of this lecture Competitiveness and Upgrading of firms and SMEs (contribute to LED) Clusters (what advantages, externalities, collective actions, collective efficiency) Global Value Chains (only introductory references. models of organization, typologies, governance, distribution of rents) Empirical evidence from a research project in LA (IADB and Harvard) Methodology Results Implications for Policies 2

3 How the international productive context is changing Grow at a global level activities that are: Geographically dispersed (fragmented) but Functionally integrated; Grow their dispersion across countries;.. With large global buyers that lead its creation and activities; Known as Global Value Chains (GVCs), Global Production Networks, Production Chains,. and forms of productive agglomeration also persist (cluster) New attention to the relationships (linkages): The concept of governance (coordination) is central; The impact of governance on the generation, transfer, diffusion of knowledge and on enterprise upgrading. What effect on the distribution of the benefits, opportunities, rents? 3

4 Increasing globalization; Various ways of penetrating global markets Understand of dynamic factors within value chains to identify how to enter global markets in a sustainable way. 4

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6 Cost of a 3 Minute 3 Telephone Call, New York to London (Constant 1990, U.S. $)

7 Average Tariffs in Industrial Countries % % % Post. War 1960's Now

8 Trade to GDP Ratios Rose Dramatically over the Last Decade (Export plus import as a percentage of GDP)

9 Low road vs. high road to internationalization (Brusco, ILO, Kaplinsky ) In a largely liberalized world forcing producers to operate on a global market, the key policy issue is not whether to participate in global markets, but how to do so in a way which provides for sustainable growth 9

10 Immiserizing growth The low road is one of immiserizing growth, a trajectory in which producers face intense competition and are engaged in a race to the bottom. For example if export prices fall faster than export volumes increase (i.e. wooden furniture exports to E.U.) or if increased exports can only be paid for by lower wages (i.e. Synos Valley). 10

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12 The high road is one of increasing and improving participation in the global economy, realising sustained income growth. How do we explain the difference between the different roads to globalization? 12

13 UP GRADI NG Upgrading is a necessary condition for a high road path to competitiveness in the context of globalization i.e. increase and improve participation to the international economy, and ensure a sustainable growth of per capita incomes 13

14 UPGRADING = innovation to increase value added Different forms of upgrading: of processes of products functional intersectoral 14

15 INNOVATION is crucial for upgrading innovation not defined as a breakthrough into a product or a process that is new to the world. It is rather a story of marginal, evolutionary improvements of products and processes, that are new to the firm, and that allow it to keep up with an international (moving) standard. 15

16 Different forms of UPGRADING in a VC I C II C III C B B B Upgrading into other Chain Functional Upgrading A A A Product/Process Upgrading 16

17 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). 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).

18 Functional upgrading: Firms acquire new functions (or abandon existing function) 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). 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).

19 Functional Upgrading 19

20 How can SMEs face the challenge of upgrading? Through (local) industrial organization in the form of: 1. Clusters 2. Value Chains 20

21 Clusters & GVC The focus on industrial clusters provides a tool to analyse the role of internal linkages in generating competitive advantages and sustaining the upgrading process of SMEs; The Value Chain analysis is a tool which provides a «big picture» of linkages, stressing the role of linkages with key external actors. 21

22 Clusters and Value Chains: Two branches of analysis in the Literature The analysis of industrial clusters is focused on the role of local linkages in generating competitive advantages in export industries. The global value chain literature takes a very different approach emphasising cross border linkages between firms in global production and distribution systems. 22

23 A Cluster is a geographical agglomeration of specialised enterprises Firms (SMEs) localized within clusters benefit from collective efficiency (from which they derive their competitive advantages): Together, they generate external economies, that may affect (spillover) other firms (involuntary effects passive of participating in a cluster); They may carry out joint actions (conscious effects active of participating to a cluster); 23

24 In addition, clusters may be also characterized by the following stylized facts: Strong and relatively homogeneous cultural and social background; Intensive backward and forward linkages; Public and private institutions supporting the cluster. 24

25 From casual advantages to collective efficiency Spontaneous Advantages Collective (Joint) Actions Collective Efficiency 25

26 External economies The availability of a pool of specialized skills; Cheap and ready available supply of specialized inputs; Easy access to specialized trade and technical knowledge and rapid dissemination of information; Improved market access: the concentration attracts customers. Relationships based on mutual trust and shared values (social capital) 26

27 Examples of Collective Actions (IADB M.Dini M.Dini) PROJECTS Goat leather producers, Córdoba Leather producers, Guanajuato México Isabella Grapes producers Electronics, Córdoba RESULTS Reduction in costs related to raw material procurement Reduction in commercialization costs Established a trade relationship with agro industrial producers Defined a standard for Isabella grapes Cost reduction in purchasing an automatically operated machine 2/3 savings of consulting costs for CMM certification Software Córdoba Quality export wines, Uruguay Program of specialized training for 1,200 professionals (after University) New Law to support the sector Increase in number of international clients Reduction in commercialization costs of quality wine exports 27

28 Tipology of Collective Actions Nadvi Nadvi,, 1999, Dini No. Of Firms Many Few Horizontal Territorial Agreements or projects Cooperation in business associations, Joint participation to trade fairs, collective provision of business development services Horizontal Networks Joint purchase of inputs, sale with a common brand Vertical Sectoral Agreements or projects backward with providers, and forward with traders and customers Vertical Networks 28

29 ..In the literature multiple definitions of cluster Sectoral and spatial concentration of firms»nadvi and Schmitz 1999 Sectoral and spatial concentration of firms and Institutions:»Di Tommaso and Rabellotti 1999 A set of firms and institutions, geographically close and economically inter related»viesti 2001»Porter 1998»Pietrobelli Rabellotti

30 CLUSTER or DISTRICT? Following Bellandi, Di Tommaso and Rubini (2006) a cluster is defined on the basis of the industrial (economic) relations, while a district is defined on the basis of the socioeconomic relations Following Schmitz (and others) an ID is a cluster where systems of inter relationships among enterprises have developed, on the basis of a process of external division of labour, specialization and productive complementarities. 30

31 Moreover. The concept of Industrial Atmosphere: agglomeration and improvement (both endogenous and exogenous) of labour skills Ideas and innovation flow Reduced uncertainty in relationships among enterprises Lowers risk of opportunistic behaviour There are downsides: Proximity allows transfer of good practices as well as bad practices; Proximity is not sufficient to foster diffusion on strategic knowledge and creation of new ideas and technologies The fear to lose the advantages related to innovation may prevail, and this may induce free riding and under investments in innovation The gradual (slow) process of evolution of these mechanisms of coordination may not allow assimilation (generation) of radical innovations 31

32 Geographic concentration of many firms sectorally specialised Geographic concentration of many firms and institutions sectorally specialised that succeed in developing collective actions and joint projects towards development of competitiveness More complex Less complex Geographic concentration of many firms and institutions sectorally specialised Geographic concentration of many firms and institutions sectorally specialised that succeed in developing collective actions and joint projects towards development of competitiveness and base their strategic vision on a deep integration between the economic dimension and the social dimension of the community 32

33 In Sum Most authors identify three necessary conditions for the existence of a cluster: A critical mass of firms; Their spatial concentration; Their sectoral specialization No agreement on how to measure these variables, (e.g. on the geographical dimension: small places or supranational spaces?). Some authors add additional features such as: the intensity of the relationships among firms localised in the cluster, the presence of support organizations, a shared culture and set of values. 33

34 Linking local clusters to global value chains Global customer Large scale, multioutlet retailer Small scale retailer National boundary Buyer (including specialized buyers and transnational corps.) Buyer and export agent Local customers Large scale or multiplant manufacturer Small scale manufacturer Local cluster Small scale manufacturer 34

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36 Methodology Analysis of 50 empirical cases of clusters in LA (11 original) Selection criteria: 1. Agglomeration; 2. Value Chains; 3. Upgrading; 4. Policy lessons; Analysis and measurement of: 1. Collective Efficiency [0 3] (external economies + joint actions) 2. Governance of the value chains [Market, network, quasi hierarchy, hierarchy] 3. Models of Upgrading: of products, processes, functional, intersectoral [0 3] 36

37 Harvard University Press, 2007, Cambridge Ma. atalog/pieupg.html

38 1. Resource based industries The case studies Agro industry: melon in Rio Grande do Norte, mangos in Petrolina and apples in Santa Catarina, BRAZIL (R. Gomes, MIT, Boston) Salmon cluster in Southern CHILE (C. Maggi, Fondo de Innovación Tecnológica, Bío Bío) Milk and dairy cluster in Boaco and Chontales, NICARAGUA (N. Artola, Nitlapán, Universidad Centroamericana, Managua, and D. Parrilli, Università di Ferrara) 2. Complex Product Systems industries Metalworking sector, State of Espirito Santo, BRAZIL (J. Cassiolato, Universidade Federal de Rio de Janeiro and A. Villaschi, Universidade Federal do Espirito Santo) 3. Traditional Manufacturing Industries Traditional furniture in Chipilo, Puebla, MEXICO (E. Zepeda, UAM, Mexico); Manufacturing Clusters in Mezzogiorno, ITALY (G. Viesti, Università di Bari and D.Cersosimo, Università della Calabria) 4. High Tech industries Software clusters in Guadalajara, Monterrey, D.F., Aguascalientes, MEXICO (C. Ruiz Duran, UNAM) 5. An extensive survey on the existing literature 50 cases of clusters and value chains in Latin America (E. Giuliani, Università di Pisa) 38

39 What Policy Implications? How to promote competitiveness and upgrading in SMEs localised in clusters and that participate in global value chains? 39

40 Action Menu to promote clusters competitiveness Promote the development of External Economies Promote and improve inter firm relationships Strengthen local position within global value chains Source: based on authors field studies 40

41 2. Promote and Improve Inter firm Relationships Create and improve trust among enterprises Promote joint projects Create and strengthen Industrialists Business Associations Improve and strengthen local supply of real and financial services; Improve external linkages of the cluster Source: based on authors field studies 41

42 3. Strengthen local standing within global value chains Attract chain leaders into the cluster Promote upgrading of local intermediate input providers Help interactions within the value chains ( articuladores ) Foster access to new markets and alternative value chains Support SMEs in their efforts to achieve international standards (quality, sanitary ) Source: based on authors field studies 42

43 Policy Implications of many of these analyses key principles: 1. key stakeholders, even if located far away, need to be involved in the policy support. 2. A proper understanding of VCs (i.e. structure, governance) helps identify points of leverage and the powerful interests within the VC 3. Knowledge flows within clusters and value chains play a central role, and they are themselves the object of a severe competition (and power). 43

44 Policy Implications (for different sectors in LA) Traditional Manufacturing industries: Promote linkages between firms; Promote access to new additional value chains; NR based industries: Promote public private collaboration in research and disseminate research to SMEs; Promote the adoption of quality and sanitary standards, environmental regulations, and enforce quality inspections and controls; Complex Product Systems industries: Promote/support network brokers ( articuladores ); Set up an incentive framework aimed at inducing large firms to source locally and to support their suppliers upgrading strategies; Specialised suppliers (Software): Invest in Highly Skilled Professional.

45 Thank you!!!! Prof. Carlo Pietrobelli Director of CREI University of Roma Tre,, Italy 45