Journal of Business Ethics

, Volume 133, Issue 1, pp 25–38 | Cite as

Economic and Social Upgrading in Global Value Chains and Industrial Clusters: Why Governance Matters



The burgeoning literature on global value chains (GVCs) has recast our understanding of how industrial clusters are shaped by their ties to the international economy, but within this context, the role played by corporate social responsibility (CSR) continues to evolve. New research in the past decade allows us to better understand how CSR is linked to industrial clusters and GVCs. With geographic production and trade patterns in many industries becoming concentrated in the global South, lead firms in GVCs have been under growing pressure to link economic and social upgrading in more integrated forms of CSR. This is leading to a confluence of “private governance” (corporate codes of conduct and monitoring), “social governance” (civil society pressure on business from labor organizations and non-governmental organizations), and “public governance” (government policies to support gains by labor groups and environmental activists). This new form of “synergistic governance” is illustrated with evidence from recent studies of GVCs and industrial clusters, as well as advances in theorizing about new patterns of governance in GVCs and clusters.


Corporate social responsibility Global value chains Industrial clusters Governance Economic upgrading Social upgrading 



The authors would like to thank Peter Lund-Thomsen and two anonymous reviewers for valuable feedback on earlier versions of this paper. Lee’s work was supported by the research fund of Hanyang University (HY-2012-2430). All errors of fact and interpretation are our responsibility.


  1. Altenburg, T., & Meyer-Stamer, J. (1999). How to promote clusters: Policy experiences from Latin America. World Development, 27(9), 1693–1713.CrossRefGoogle Scholar
  2. Amengual, M. (2010). Complementary labor regulation: The uncoordinated combination of state and private regulators in the Dominican Republic. World Development, 38(3), 405–414.CrossRefGoogle Scholar
  3. Bair, J., & Gereffi, G. (2001). Local clusters in global chains: The causes and consequences of export dynamism in Torreon’s blue jeans industry. World Development, 29(11), 1885–1903.CrossRefGoogle Scholar
  4. Barrientos, S. (2013). Corporate purchasing practices in global production networks: A socially contested terrain. Geoforum, 44, 44–51.CrossRefGoogle Scholar
  5. Barrientos, S., Gereffi, G., & Nathan, D. (2012). Economic and social upgrading in global value chains: Emerging trends and pressures. Capturing the Gains Summit Briefing, University of Manchester. Retrieved June 9, 2014 from
  6. Barrientos, S., Gereffi, G., & Rossi, A. (2011). Economic and social upgrading in global production networks: A new paradigm for a changing world. International Labour Review, 150(3–4), 319–340.CrossRefGoogle Scholar
  7. Barrientos, S., & Kritzinger, A. (2004). Squaring the circle: Global production and the informalization of work in South African fruit exports. Journal of International Development, 16(1), 81–92.CrossRefGoogle Scholar
  8. Barrientos, S., & Smith, S. (2007). Do workers benefit from ethical trade? Assessing codes of labour practice in global production systems. Third World Quarterly, 28(4), 713–729.CrossRefGoogle Scholar
  9. Barrientos, S., & Visser, M. (2012). South African horticulture: Opportunities and challenges for economic and social upgrading in value chains. Capturing the Gains Working Paper 2012/12, University of Manchester. Retrieved June 9, 2014 from
  10. Bartley, T. (2005). Corporate accountability and the privatization of labor standards: Struggles over codes of conduct in the apparel industry. Research in Political Sociology, 14, 211–244.CrossRefGoogle Scholar
  11. Bernhardt, T., & Milberg, W. (2011). Economic and social upgrading in global value chains: Analysis of horticulture, apparel, tourism and mobile telephones. Capturing the Gains Working Paper 2011/06. Retrieved May 19, 2014 from
  12. Carr, M., & Chen, M. (2004). Globalization, social exclusion and work: With special reference to informal employment and gender. International Labour Office, Geneva. Retrieved November 20, 2013 from
  13. Carswell, G., & De Neve, G. (2013). Labouring for global markets: Conceptualising labour agency in global production networks. Geoforum, 44, 62–70.CrossRefGoogle Scholar
  14. Cattaneo, O., Gereffi, G., Miroudot, S., & Taglioni, D. (2013). Joining, upgrading and being competitive in global value chains: A strategic framework. World Bank Policy Research Working Paper 6406, The World Bank, Washington DC. Retrieved May 10, 2014 from
  15. Chiarvesio, M., Di Maria, E., & Micelli, S. (2010). Global value chains and open networks: The case of Italian industrial districts. European Planning Studies, 18(3), 333–350.CrossRefGoogle Scholar
  16. Contreras, O. F., Carrillo, J., & Alonso, J. (2012). Local entrepreneurship within global value chains: A case study in the Mexican automotive industry. World Development, 40(5), 1013–1023.CrossRefGoogle Scholar
  17. Coslovsky, S. V. (2014). Flying under the radar? The state and the enforcement of labour laws in Brazil. Oxford Development Studies, 42(2), 190–216.CrossRefGoogle Scholar
  18. Coslovsky, S. V., & Locke, R. (2013). Parallel paths to enforcement: Private compliance, public regulation, and labor standards in the Brazilian sugar sector. Politics & Society, 41(4), 497–526.CrossRefGoogle Scholar
  19. Crow, M., & Batz, M. B. (2006). Clean and competitive? Small-scale bleachers and dyers in Tirupur, India. In A. Blackman (Ed.), Small firms and the environment in developing countries–collective action and collective impacts (pp. 147–170). Washington, DC: REF Press.Google Scholar
  20. Damodaran, S. (2010). Upgradation or flexible casualization? Exploring the dynamics of global value chain incorporation in the Indian leather industry. In A. Posthuma & D. Nathan (Eds.), Labour in global production networks in India (pp. 231–250). New Delhi; New York: Oxford University Press.Google Scholar
  21. De Marchi, V., & Grandinetti, R. (2014). Industrial districts and the collapse of the Marshallian model: Looking at the Italian experience. Competition & Change, 18(1), 70–87.CrossRefGoogle Scholar
  22. De Marchi, V., Di Maria, E., & Ponte, S. (2014). Multinational firms and the management of global networks: Insights from global value chain studies. In T. Pedersen , M. Venzin, T. M. Devinney & L. Tihanyi (Eds.), Orchestration of the global network organization (pp. 463–486). Bingley: Emerald Group Publishing Limited.Google Scholar
  23. De Neve, G. (2014). Fordism, flexible specialisation and CSR: How Indian garment workers critique neoliberal labour regimes. Ethnography, 15(2), 184–207.CrossRefGoogle Scholar
  24. Dolan, C. S., & Opondo, M. (2005). Seeking common ground—multi-stakeholer processes in Kenya’s cut flower industry. Journal of Corporate Citizenship, 18, 87–98.CrossRefGoogle Scholar
  25. Doner, R. F., & Schneider, B. R. (2000). Business associations and economic development: Why some associations contribute more than others. Business and Politics, 2(3), 261–288.CrossRefGoogle Scholar
  26. Elliott, K. A., & Freeman, R. B. (2003). The role global labor standards could play in addressing basic needs. In J. Heymann (Ed.), Global inequalities at work (pp. 299–327). New York: Oxford University Press.CrossRefGoogle Scholar
  27. European Commission. (2011). A renewed EU strategy 2011–2014 for corporate social responsibility. European Commission, Brussels. Retrieved May 10, 2014 from
  28. Gallagher, M. E. (2014). China’s workers movement & the end of the rapid-growth era. Daedalus, 143(2), 81–95.CrossRefGoogle Scholar
  29. Gereffi, G. (1994). The organization of buyer-driven global commodity chains: How US retailers shape overseas production networks. In G. Gereffi & M. Korzeniewicz (Eds.), Commodity chains and global capitalism (pp. 95–122). Westport, CT: Greenwood Press.Google Scholar
  30. Gereffi, G. (1999). International trade and industrial upgrading in the apparel commodity chains. Journal of International Economics, 48(1), 37–70.CrossRefGoogle Scholar
  31. Gereffi, G. (2005). The global economy: Organization, governance, and development. In N. J. Smelser & R. Swedberg (Eds.), The handbook of economic sociology (2nd ed., pp. 160–182). Princeton, NJ: Princeton University Press.Google Scholar
  32. Gereffi, G. (2014). Global value chains in a post-Washington consensus world. Review of International Political Economy, 21(1), 9–37.CrossRefGoogle Scholar
  33. Gereffi, G., & Fernandez-Stark, K. (2011). Global value chain analysis: A primer. Center on Globalization, Governance & Competitiveness, Durham, NC. Retrieved December 4, 2013 from
  34. Gereffi, G., Humphrey, J., & Sturgeon, T. (2005). The governance of global value chains. Review of International Political Economy, 12(1), 78–104.CrossRefGoogle Scholar
  35. Gereffi, G., & Lee, J. (2012). Why the world suddenly cares about global supply chains. Journal of Supply Chain Management, 48(3), 24–32.CrossRefGoogle Scholar
  36. Gereffi, G., & Sturgeon, T. J. (2013). Global value chain-oriented industrial policy: The role of emerging economies. In D. K. Elms & P. Low (Eds.), Global value chains in a changing world (pp. 329–360). Geneva: World Trade Organization, Fung Global Institute and Temasek Foundation Centre for Trade & Negotiations.Google Scholar
  37. Gibbon, P., Bair, J., & Ponte, S. (2008). Governing global value chains: An introduction. Economy and Society, 37(3), 315–338.CrossRefGoogle Scholar
  38. Greenhouse, S. (2013). U.S. Retailers decline to aid factory victims in Bangladesh. New York Times, November 23. Retrieved July 19, 2014 from
  39. Humphrey, J., & Memedovic, O. (2006). Global value chains in the agrifood sector. United Nations Industrial Development Organization Working Paper, Vienna. Retrieved March 11, 2014 from
  40. Humphrey, J., & Schmitz, H. (2002). How does insertion in global value chains affect upgrading in industrial clusters? Regional Studies, 36(9), 1017–1027.CrossRefGoogle Scholar
  41. ILO. (1999). Decent work: Report of the director-general to the 89th session of the international labour conference. International Labor Organization, Geneva. Retrieved May 10, 2014 from
  42. Jenkins, R. O., Pearson, R., & Seyfang, G. (2002). Corporate responsibility and labour rights: Codes of conduct in the global economy. London: Earthscan.Google Scholar
  43. Justice, D. W. (2005). The corporate social responsibility concept and phenomenon: Challenges and opportunities for trade unionists. Presented at the ITC-ILO/ACTRAV Course A3-50909: Trade Union Training for Global Union Federations in Asia and the Pacific Region on Globalization, Workers’ Rights and Corporate Social Responsibility (CSR), Kuala Lumpur, Malaysia.Google Scholar
  44. Kaplinsky, R., & Farooki, M. (2010). Global value chains, the crisis, and the shift of markets from north to south. In O. Cattaneo, G. Gereffi, & C. Staritz (Eds.), Global value chains in a postcrisis world: A development perspective (pp. 125–153). Washington, DC: World Bank.Google Scholar
  45. Kaplinsky, R., Terheggen, A., & Tijaja, J. (2011). China as a final market: The Gabon timber and Thai cassava value chains. World Development, 39(7), 1177–1190.CrossRefGoogle Scholar
  46. Ketels, C. H., & Memedovic, O. (2008). From clusters to cluster-based economic development. International Journal of Technological Learning, Innovation and Development, 1(3), 375–392.CrossRefGoogle Scholar
  47. Khara, N., & Lund-Thomsen, P. (2012). Value chain restructuring, work organization and labour outcomes in football manufacturing in India. Competition & Change, 16(4), 261–280.CrossRefGoogle Scholar
  48. Knorringa, P. (2011). Value chain responsibility in the global south. In S. M. Murshed, P. Goulart, & L. Serino (Eds.), South-South globalization: Challenges and opportunities for development (pp. 194–208). New York: Routledge.Google Scholar
  49. Knorringa, P., & Pegler, L. (2007). Integrating labour issues in global value chains analysis: Exploring implications for labour research and unions. In V. Schmidt (Ed.), Trade union responses to globalisation: A review by the global unions research network (pp. 35–51). Geneva: International Labour Organization.Google Scholar
  50. Kolk, A., & van Tulder, R. (2004). Ethics in international business: Multinational approaches to child labor. Journal of World Business, 39(1), 49–60.CrossRefGoogle Scholar
  51. Lee, J., Gereffi, G., & Beauvais, J. (2012). Global value chains and agrifood standards: Challenges and possibilities for smallholders in developing countries. Proceedings of the National Academy of Sciences of the United States of America, 191(31), 12326–12331.CrossRefGoogle Scholar
  52. Locke, R. M. (2013). The promise and limits of private power: Promoting labor standards in a global economy. Cambridge; New York: Cambridge University Press.CrossRefGoogle Scholar
  53. Locke, R., Amengual, M., & Mangla, A. (2009). Virtue out of necessity? Compliance, commitment, and the improvement of labor conditions in global supply chains. Politics & Society, 37(3), 319–351.CrossRefGoogle Scholar
  54. Lund-Thomsen, P., & Lindgreen, A. (2014). Corporate social responsibility in global value chains: Where are we now and where are we going? Journal of Business Ethics, 123(1), 11–22.CrossRefGoogle Scholar
  55. Lund-Thomsen, P., & Nadvi, K. (2010a). Clusters, chains and compliance: Corporate social responsibility and governance in football manufacturing in South Asia. Journal of Business Ethics, 93(2), 201–222.CrossRefGoogle Scholar
  56. Lund-Thomsen, P., & Nadvi, K. (2010b). Global value chains, local collective action and corporate social responsibility: A review of empirical evidence. Business Strategy and the Environment, 19(1), 1–13.CrossRefGoogle Scholar
  57. Lund-Thomsen, P., & Pillay, R. G. (2012). CSR in industrial clusters: An overview of the literature. Corporate Governance, 12(4), 568–578.CrossRefGoogle Scholar
  58. Mayer, F. (2014). Leveraging private governance for public purpose: Business, civil society and the state in labour regulation. In A. Payne & N. Philips (Eds.), Handbook on the international political economy of governance (pp. 344–360). Cheltenham, UK: Edward Elgar.Google Scholar
  59. Mayer, F., & Gereffi, G. (2010). Regulation and economic globalization: Prospects and limits of private governance. Business and Politics, 12(3), 1–25.CrossRefGoogle Scholar
  60. Mezzadri, A. (2014). Indian garment clusters and CSR norms: Incompatible agendas at the bottom of the garment commodity chain. Oxford Development Studies, 42(2), 238–258.CrossRefGoogle Scholar
  61. Nadvi, K. (2014). ‘Rising powers’ and labour and environmental standards. Oxford Development Studies, 42(2), 137–150.CrossRefGoogle Scholar
  62. Nadvi, K., & Barrientos, S. (2004). Industrial clusters and poverty reduction: Towards a methodology for poverty and social impact assessment of cluster development initiatives. United Nations Industrial Development Organization, Vienna. Retrieved December 10, 2013 from
  63. Nathan, D., & Sarkar, S. (2011). Blood on your mobile phone? Capturing the gains for artisanal miners, poor workers and women. Capturing the Gains Briefing Note, No. 2. Retrieved June 9, 2014 from
  64. Neilson, J., & Pritchard, B. (2009). Value chain struggles: Institutions and governance in the plantation districts of South India. Malden, MA.: Wiley.CrossRefGoogle Scholar
  65. Neilson, J., & Pritchard, B. (2010). Fairness and ethicality in their place: The regional dynamics of fair trade and ethical sourcing agendas in the plantation districts of South India. Environment and Planning A, 42(8), 1833–1851.CrossRefGoogle Scholar
  66. O’Rourke, D. (2003). Outsourcing regulation: Analyzing nongovernmental systems of labor standards and monitoring. Policy Studies Journal, 31(1), 1–29.CrossRefGoogle Scholar
  67. O’Rourke, D. (2006). Multi-stakeholder regulation: Privatizing or socializing global labor standards? World Development, 34(5), 899–918.CrossRefGoogle Scholar
  68. Palpacuer, F. (2008). Bringing the social context back in: Governance and wealth distribution in global commodity chains. Economy and Society, 37(3), 393–419.CrossRefGoogle Scholar
  69. Piore, M. J., & Sabel, C. F. (1984). The second industrial divide. New York: Basic Books.Google Scholar
  70. Polaski, S. (2003). Protecting labor rights through trade agreements: An analytical guide. UC Davis Journal of International Law and Policy, 10(1), 13–25.Google Scholar
  71. Polaski, S. (2006). Combining global and local forces: The case of labor rights in Cambodia. World Development, 34(5), 919–932.CrossRefGoogle Scholar
  72. Ponte, S., & Gibbon, P. (2005). Quality standards, conventions and the governance of global value chains. Economy and Society, 34(1), 1–31.CrossRefGoogle Scholar
  73. Ponte, S., & Sturgeon, T. (2014). Explaining governance in global value chains: A modular theory-building effort. Review of International Political Economy, 21(1), 195–223.CrossRefGoogle Scholar
  74. Porter, M. E. (1998). Clusters and the new economics of competition. Harvard Business Review, 76(6), 77–90.Google Scholar
  75. Posthuma, A. (2008). Seeking the high road to Jepara: Challenges for economic and social upgrading in Indonesian wood furniture clusters. In J. A. Puppim de Oliveira (Ed.), Upgrading clusters and small enterprises in developing countries: Environmental, labor, innovation and social issues (pp. 23–43). Burlington, VT: Ashgate.Google Scholar
  76. Posthuma, A. (2010). Beyond ‘regulatory enclaves’: Challenges and opportunities to promote decent work in global production networks. In A. Posthuma & D. Nathan (Eds.), Labour in global production networks in India (pp. 57–80). New York: Oxford University Press.Google Scholar
  77. Posthuma, A., & Nathan, D. (Eds.). (2010). Labour in global production networks in India. New York: Oxford University Press.Google Scholar
  78. Puppim de Oliveira, J. A. (2008a). Introduction: Social upgrading among small firms and clusters. In J. A. Puppim de Oliveira (Ed.), Upgrading clusters and small enterprises in developing countries: Environmental, labor, innovation and social issues (pp. 1–21). Burlington, VT: Ashgate.Google Scholar
  79. Puppim de Oliveira, J. A. (Ed.). (2008b). Upgrading clusters and small enterprises in developing countries: Environmental, labor, innovation and social issues. Burlington, VT: Ashgate.Google Scholar
  80. Pyke, F. S., Becattini, G., & Sengenberger, W. (Eds.). (1990). Industrial districts and inter-firm co-operation in Italy. Geneva: International Institute for Labour Studies.Google Scholar
  81. Rodríguez-Garavito, C. A. (2005). Global governance and labor rights: Codes of conduct and anti-sweatshop struggles in global apparel factories in Mexico and Guatemala. Politics & Society, 33(2), 203–333.CrossRefGoogle Scholar
  82. Ruwanpura, K. N., & Roncolato, L. (2006). Child rights: An enabling or disabling right? The nexus between child labor and poverty in Bangladesh. Journal of Developing Societies, 22(4), 359–378.CrossRefGoogle Scholar
  83. Ruwanpura, K. N., & Wrigley, N. (2011). The costs of compliance? Views of Sri Lankan apparel manufacturers in times of global economic crisis. Journal of Economic Geography, 11(6), 1031–1049.CrossRefGoogle Scholar
  84. Schmitz, H. (1995). Collective efficiency: Growth path for small-scale industry. Journal of Development Studies, 31(4), 529–566.CrossRefGoogle Scholar
  85. Schmitz, H. (2004). Local enterprises in the global economy: Issues of governance and upgrading. Cheltenham, UK: Edward Elgar.CrossRefGoogle Scholar
  86. Schmitz, H. (2006). Learning and earning in global garment and footwear chains. European Journal of Development Research, 18(4), 546–571.CrossRefGoogle Scholar
  87. Schmitz, H., & Knorringa, P. (2000). Learning from global buyers. Journal of Development Studies, 37(2), 177–205.CrossRefGoogle Scholar
  88. Schmitz, H., & Nadvi, K. (1999). Clustering and industrialization: Introduction. World Development, 27(9), 1503–1514.CrossRefGoogle Scholar
  89. Selwyn, B. (2013). Social upgrading and labour in global production networks: A critique and an alternative conception. Competition & Change, 17(1), 75–90.CrossRefGoogle Scholar
  90. Sturgeon, T. J. (2003). What really goes on in Silicon Valley? Spatial clustering and dispersal in modular production networks. Journal of Economic Geography, 3(2), 199–225.CrossRefGoogle Scholar
  91. Sturgeon, T. J. (2009). From commodity chains to value chains: Interdisciplinary theory building in an age of globalization. In J. Bair (Ed.), Frontiers of commodity chain research (pp. 110–135). Stanford, California: Stanford University Press.Google Scholar
  92. Sturgeon, T. J., Van Biesebroeck, J., & Gereffi, G. (2008). Value chains, networks and clusters: Reframing the global automotive industry. Journal of Economic Geography, 8(3), 297–321.CrossRefGoogle Scholar
  93. Suresh, T. G. (2010). Cost cutting pressures and labour relations in Tamil Nadu’s automobile components supply chain. In A. Posthuma & D. Nathan (Eds.), Labour in global production networks in India (pp. 251–271). New York: Oxford University Press.Google Scholar
  94. Tewari, M., & Pillai, P. (2005). Global standards and the dynamics of environmental compliance in India’s leather industry. Oxford Development Studies, 33(2), 245–267.CrossRefGoogle Scholar
  95. van Tulder, R. (2009). Chains for change. Position paper for the Third Max Havelaar lecture. Retrieved January 6, 2014 from

Copyright information

© Springer Science+Business Media Dordrecht 2014

Authors and Affiliations

  1. 1.Department of Sociology, Center for Globalization, Governance and CompetivenessDuke UniversityDurhamUSA
  2. 2.School of BusinessHanyang UniversitySeoulSouth Korea

Personalised recommendations