Abstract
This chapter provides overview of the book. Considering the evolution of global value chains (GVCs), this book’s objectives are as follows: (1) GVC participation and influencing factors: To elucidate the methodologies used to analyze GVC participation and examine the factors influencing the participation of developing nations, especially the link between GVC participation and income levels. (2) GVC upgrading and influencing factors: To understand the methodologies for analyzing GVC upgrading and explore the elements affecting GVC enhancement in developing nations. This is particularly relevant for nations experiencing a surge in imported inputs due to weak industry supplier bases. (3) The role of connectivity in GVC dynamics: To delve into the evolution and present state of maritime and aviation connectivity and examine its repercussions on GVC involvement and the subsequent transformation of industrial frameworks.
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Notes
- 1.
This process, which started in the early nineteenth century, is called globalization’s “first unbundling,” because production and consumption were separated and vertical trade commenced between the North and South.
- 2.
Krugman and Venables (1995) made a similar argument. Their spatial economics model focuses on the decline in transport costs as a driving force for the agglomeration of manufacturing activities in the North and its subsequent dispersion to the South. Baldwin’s novelty, however, lies in the introduction of coordination costs, closely associated with information and communication costs.
- 3.
GVCs have been studied by a variety of researchers, including not only economists but also sociologists, economic geographers, and business strategists. Their studies examine the globalized economy from different angles. Economists typically delve into the dynamics of production processes through the lens of the fragmentation theory. However, other researchers predominantly examine GVCs from the perspective of business activities, focusing on the value chain concept, which dissects the sequential series of interdependent activities integral to the creation, production, and delivery of a product or service. This encompasses everything from initial conception, various production stages, delivery to end consumers, and post-sale services to the eventual disposal or recycling (Porter 1985). Theoretical frameworks that are relevant to the value chain concept include global commodity chains (GCCs: Gereffi 1994), global value chains (GVCs: Gereffi et al. 2005), and global production networks (GPNs: Henderson et al. 2002). In contrast, the fragmentation theory focuses on a specific facet of value chains: geographical distribution of parts and component manufacturing within comprehensive, vertically integrated production processes. The modern multi-country input-output methodology broadens the analytical spectrum to encapsulate the value chain concept. However, there are inherent limitations with input-output data. These include the absence of granular data, especially in service sectors, categorization based on industry—rather than business functions, and transactions recorded domestically rather than by nationality (Sturgeon et al. 2013; Inomata 2017).
- 4.
Production blocks are connected via service links, i.e., the bundle of activities comprising transportation, insurance, telecommunication, quality control, and management coordination to ensure the production blocks interact suitably (Arndt and Kierzkowski 2001). In this context, Yi (2003, 2010) emphasized the impact of trade cost on production fragmentation because of two magnification forces: (1) goods that cross national borders multiple times incur tariffs and transportation costs multiple times; (2) tariffs are applied to gross imports, even though the value added by the direct exporter may be only a fraction of this amount.
- 5.
In addition to the onshoring or offshoring decision, firms must make an important determination, namely, to “integrate or outsource.” The firm’s choice of the organizational form was studied by Antràs and Helpman (2004), who argued that firm heterogeneity in terms of productivity affects this decision. The most productive firm would choose to undertake foreign direct investment, the next most productive firm would choose offshore outsourcing, and firms that cannot undertake offshore outsourcing would choose either domestic production or domestic outsourcing. For a comprehensive review of economic theories related to GVCs, see Inomata (2017).
- 6.
For details on the middle-income trap, see Chap. 5.
- 7.
As an important exception, Limão and Venables (2001) used actual shipping company quotes for the cost of transporting a standard container from Baltimore in the US to selected destinations to estimate the difference in transportation costs by transport modes; this was used to construct a dataset for various countries. However, this approach leaves a question regarding the representativeness of the sample routes. Limão and Venables (2001) also used the ratio of CIF (cost, insurance, and freight) to FOB (free on board) values of bilateral trade as a proxy for trade costs. Again, however, there are some problems in the quality and availability of data.
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Kuroiwa, I., Umezaki, S. (2024). Introduction. In: Global Value Chains and Industrial Development. SpringerBriefs in Economics. Springer, Singapore. https://doi.org/10.1007/978-981-97-0021-9_1
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