Upgrading and Value Capture in Global Value Chains in Hungary: More Complex than What the Smile Curve Suggests
This chapter presents a conceptual model to explain why the upgrading of MNCs’ manufacturing subsidiaries fails to translate into additional value capture for upgraded actors. The model, a dynamic version of Mudambi’s (J Econ Geogr 8(5): 699–725, 2008) smile curve, integrates the concept of value capture. It is shown that over time, the shape of the original smile curve transforms. The curve shifts downwards, which represents the shrinking margins of actors. This effect can be countered through upgrading. The bottom part of the curve becomes flatter: this represents the commoditisation of business functions undertaken by upgraded subsidiaries. The sides become steeper as a result of changes in the specialisation of actors at the sides of the curve. The smile is transformed into a “bathtub.”
- Arrighi, G., & Drangel, J. (1986). The stratification of the world-economy: An exploration of the semiperipheral zone. Review, 10(1), 9–74.Google Scholar
- Bajgar, M., & Javorcik, B. (2014). Climbing rungs of the quality ladder: FDI and domestic exporters in Romania. Mimeo. http://www.nottingham.ac.uk/gep/documents/conferences/2013-14/13th-post-graduate-conference/papers/bajgarm.pdf. Accessed 24 Feb 2016.
- Baldwin, R. (2011). Trade and industrialisation after globalisation’s 2nd unbundling: How building and joining a supply chain are different and why it matters (NBER Working Papers No. 17716).Google Scholar
- Bartlett, C. A., & Ghoshal, S. (1989). Managing across borders: The transnational solution. Boston: Harvard Business School Press.Google Scholar
- Birkinshaw, J. (2000). Entrepreneurship in the global firm: Enterprise and renewal. London: Sage.Google Scholar
- Birkinshaw, J., & Hood, N. (1998). Multinational subsidiary evolution: Capability and charter change in foreign-owned subsidiary companies. Academy of Management Review, 23(4), 773–795.Google Scholar
- Davenport, T. H. (2005). The coming commoditization of processes. Harvard Business Review, 83(6), 100–108.Google Scholar
- Eichengreen, B., Park, D., & Shin, K. (2013). Growth slowdowns redux: New evidence on the middle-income trap (NBER Working Paper No. 18673).Google Scholar
- Gereffi, G., & Fernandez-Stark, K. (2011). Global value chain analysis: A primer. Duke University Center on Globalization, Governance & Competitiveness. http://www.cggc.duke.edu/pdfs/2011-05-31_GVC_analysis_a_primer.pdf. Accessed 25 Feb 2016.
- Gereffi, G., & Sturgeon, T. (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: Fung Global Institute, Nanyang Technology University and WTO.Google Scholar
- Guimón, J., & Filippov, S. (2012). Competing for high-quality FDI: Management challenges for investment promotion agencies. Institutions and Economies, 4(2), 25–43.Google Scholar
- Manning, S., Massini, S., Peeters, C., & Lewin, A. Y. (2012). Global co-evolution of firm boundaries: Process commoditization, capabilities development, and path dependencies. Solvay Brussels School of Economics and Management, Centre Emile Bernheim Working Papers 12/009.Google Scholar
- OECD. (2013). Interconnected economies: Benefiting from global value chains. Paris: OECD.Google Scholar
- Patton, M. Q. (1990). Qualitative evaluation and research methods. Newbury Park: SAGE.Google Scholar
- Pavlínek, P. (2014). Whose success? The state–foreign capital nexus and the development of the automotive industry in Slovakia. European Urban and Regional Studies. Published online before print. doi: 10.1177/0969776414557965.
- Rugman, A., Verbeke, A., & Yuan, W. (2011). Re-conceptualizing Bartlett and Ghoshal’s classification of national subsidiary roles in the multinational enterprise. Journal of Management Studies, 48(2), 253–277.Google Scholar
- Sass, M. (2004). FDI in Hungary: The first mover’s advantage and disadvantage. EIB Papers, 9(2), 62–90.Google Scholar
- Seppälä, T., & Kenney, M. (2013). Where is the value created and captured in manufacturing firms? Case precision machinery product. ETLA Brief No. 9.Google Scholar
- Szalavetz, A. (2013). Szolgáltatás jellegű vállalati tevékenységek fogoly típusú kiszervezése—funkcionális feljebb lépés a hazai feldolgozóipari leányvállalatok szemszögéből [Captive offshoring of services-type business functions—Functional upgrading at manufacturing MNCs’ Hungarian subsidiaries]. Külgazdaság, 57(5–6), 35–61.Google Scholar
- UNCTAD. (2013). World investment report. Geneva: UNCTAD.Google Scholar