Abstract
Countries, industries and firms have become progressively integrated and embedded in transnational production and distribution networks (PDNs). These networks have evolved as a result of fragmentation dynamics, in which business processes and functions once vertically integrated in a particular country have now been sliced up into smaller units, and relocated to other countries according to technological attributes and factor intensities. Competitiveness and growth opportunities of firms are now increasingly being shaped by their capacity to continuously redefine and upgrade their core competences. Innovation and knowledge creation must now take place within these evolving structures, where building capabilities to upgrade and move into skill and knowledge intensive business functions have become crucial. The concomitant challenges are new, however, and its effects to local industries and individual companies as well as policy implications are still not well understood.
This chapter discusses the challenges and opportunities of firms in developing countries in realizing innovation through undertaking skill and knowledge intensive functions in a dynamic and competitive global context. It employs the global value chain (GVC) framework to highlight the pertinent issues in concrete terms, and uses the Asian apparel value chain as the case of analysis. The apparel industry is important because it serves as one of the major non-resource-based manufacturing export sectors for many developing countries in Asia.
This is a preview of subscription content, log in via an institution to check access.
Access this chapter
Tax calculation will be finalised at checkout
Purchases are for personal use only
Notes
- 1.
A fourth type of upgrading, intersectoral upgrading, is sometimes also added as one particular type of upgrading, which suggests to switch from one production chain to another one, which is more technologically advanced (Kaplinsky and Morris 2001).
- 2.
The level of division between textiles sourcing and ‘assembly’ (CMT) functions is dependent on product groups: while in the case of knitted-fabric-based garments (such as socks and some types of underwear), these two functions tend to be integrated and carried out by the same enterprise, while that for woven-fabric-based garments it is typically catered for by different enterprises.
- 3.
In Vietnam, quite a large proportion of interviewed garment companies note that the risks associated with input sourcing often outweigh the potential gains through undertaking the additional responsibility.
- 4.
Based on author’s calculation using UN Comtrade database (SITC Rev. 3, code 84). It should be noted, however, that Bangladesh’s export data has not been recorded in this database, and thus it is likely that Vietnam’s ranking is in fact fifth. The largest exporter was China (including Hong Kong) with a 45.1 % share of total world exports, followed by Italy (5.4 %) and Germany (4.3 %). India ranked fifth, just below Vietnam, with a 3.8 % share in 2013.
- 5.
Export share was 50.8 %, based on author’s calculation using UN Comtrade database (SITC Rev. 3, code 84). Japan ranked second with a share of 13 %, followed by Korea (9.1 %) and Germany (3.8 %).
- 6.
For more details on individual company cases, please consult Goto (2014).
References
ADB. (2011). Asia 2050: Realizing the Asian century. Singapore: Asian Development Bank.
Cai, F. (2012). Is there a “middle-income trap”? Theories, experiences and relevance to China. China & World Economy, 20(1), 49–61.
Flaaen, A., Ghani, E., & Mishra, S. (2013). How to avoid middle income traps? Evidence from Malaysia (Policy Research Working Paper 6427). Washington, DC: The World Bank.
Fukunishi, T., Goto, K., & Yamagata, T. (2013). Aid for trade and value chains in textiles and apparel. Sector Study Report for the Fourth Global Review of Aid for Trade: Connecting to value chains (pp. 1–55). Geneva: WTO, OECD and IDE/JETRO.
Gereffi, G. (2014). Global value chain analysis in a post-Washington consensus world. Review of International Political Economy, 21(1), 9–37.
Gereffi, G., & Frederick, S. (2010). The global apparel value chain, trade, and the crisis: Challenges and opportunities for developing countries. In O. Cattaneo, G. Gereffi, & C. Startitz (Eds.), Global value chains in a postcrisis world: A development perspective. Washington, DC: World Bank.
Gereffi, G., & Memedovic, O. (2004). Inserting local industries into global value chains and global production networks: Opportunities and challenges for upgrading with a focus on Asia, China’s rising competitiveness and the phasing out of the multi-fibre arrangements. Vienna: United Nations Industrial Development Organization.
Gill, I., & Kharas, H. (2007). An East Asian renaissance: Ideas for economic growth. Washington, DC: The World Bank.
Goto, K. (2007). The development strategy of the Vietnamese export oriented garment industry: Vertical integration or process and product upgrading? Asian Profile, 35(5), 521–529.
Goto, K. (2011). Competitiveness and decent work in global value chains: Substitutionary or complementary? Development in Practice, 21(7), 943–958.
Goto, K. (2013). Starting businesses through reciprocal informal subcontracting: Evidence from the informal garment industry in Ho Chi Minh city. Journal of International Development, 25(4), 562–582.
Goto, K. (2014). Vietnam: Upgrading from the export to the domestic market. In T. Fukunishi & T. Yamagata (Eds.), The garment industry in low-income countries: An entry point of industrialization. Basingstoke and New York: Palgrave Macmillan.
Goto, K. (2015). The textile and garment value chain in Asia. In Kansai in the Asia Pacific: APIR economic review 2014. Osaka: Asia Pacific Institute of Research.
Goto, K., & Endo, T. (2014a). Upgrading, relocating, informalising? Local strategies in the era of globalisation: The Thai garment industry. Journal of Contemporary Asia, 44(1), 1–18.
Goto, K., & Endo, T. (2014b). Labor-intensive industries in middle-income countries: Traps, challenges, and the local garment market in Thailand. Journal of the Asia Pacific Economy, 19(2), 369–386.
Goto, K., Natsuda, K., & Thoburn, J. (2011). Meeting the challenge of China: The Vietnamese garment industry in the post MFA Era. Global Networks, 11(3), 355–379.
Hill, H. (2000). Export success against the odds: A Vietnamese case study. World Development, 28(2), 283–300.
Humphrey, J. & Schmitz, H. (2000). Governance and upgrading: Linking industrial cluster and global value chain research. IDS Working Paper 120, University of Sussex.
Kaplinsky, R. (2005). Globalization, poverty and inequality. London: Polity Press.
Kaplinsky, R., & Morris, M. (2001). A handbook for value chain research. Retrieved from http://asiandrivers.open.ac.uk/documents/Value_chain_Handbook_RKMM_Nov_2001.pdf
Lopez-Acevedo, G., & Robertson, R. (Eds.). (2012). Sewing success? Employment, wages, and poverty following the end of the multi-fibre arrangement. Washington, DC: World Bank.
Nadvi, K., & Thoburn, J. (2004). Vietnam in the global garment and textile value chain: Impacts on enters and workers. Journal of International Development, 16(1), 111–123.
Natsuda, K., Goto, K., & Thoburn, J. (2010). Challenges to the Cambodian garment industry in the global garment value chain. The European Journal of Development Research, 22(4), 469–493.
Ohno, K. (2009). Avoiding the middle-income trap: Renovating industrial policy formulation in Vietnam. ASEAN Economic Bulletin, 26(1), 25–43.
Palpacuer, F., Gibbon, P., & Thomsen, L. (2005). New challenges for developing country suppliers in global garments chains: A comparative European perspective. World Development, 33(3), 409–430.
Paus, E. (2012). Confronting the middle income trap: Insights from small latecomers. Studies in Comparative International Development, 47(2), 115–138.
Pietrobelli, C., & Rabelotti, R. (2005). Upgrading in global value chains: Lessons from Latin American clusters. In E. Giuliani, R. Rabelotti, & M. P. van Dijk (Eds.), Clusters facing competition: The importance of external linkages. Aldershot: Ashgate.
Thomsen, L. (2007). Accessing global value chains? The role of business-state relations in the private clothing industry in Vietnam. Journal of Economic Geography, 7(6), 753–776.
Woo, W. T. (2012). China meets the middle-income trap: The large potholes in the road to catching-up. Journal of Chinese Economic and Business Studies, 10(4), 313–336.
World Bank. (2010). East Asia and Pacific economic update: Robust recovery, rising risks. Washington, DC: World Bank.
Zhang, L., Yi, H., Luo, R., Liu, C., & Rozelle, S. (2013). The human capital roots of the middle income trap: The case of China. Agricultural Economics, 44(supplement), 151–162.
Author information
Authors and Affiliations
Editor information
Editors and Affiliations
Rights and permissions
Copyright information
© 2017 The Author(s)
About this chapter
Cite this chapter
Goto, K. (2017). Development Through Innovation: The Case of the Asian Apparel Value Chain. In: Little, S., Go, F., Poon, TC. (eds) Global Innovation and Entrepreneurship. Palgrave Macmillan, Cham. https://doi.org/10.1007/978-3-319-43859-7_6
Download citation
DOI: https://doi.org/10.1007/978-3-319-43859-7_6
Published:
Publisher Name: Palgrave Macmillan, Cham
Print ISBN: 978-3-319-43858-0
Online ISBN: 978-3-319-43859-7
eBook Packages: Business and ManagementBusiness and Management (R0)