global production networks
DESCRIPTION
Structures in which to study global production systems.National to international innovation systems.Mobility and diffusion of knowledge.TRANSCRIPT
GLOBAL PRODUCTION NETWORKS
BY MATT COTY
A Review of “Whither Global Production Networks in Economic
Geography”By Hess, Martin and Yeung, Henry
A Review of “Global Production Networks and the Changing Geography of Innovation Systems. Implications for
Developing Countries” By Ernst, Dieter
Overview
Structures in which to study global production systems
National to international innovation systems Mobility and diffusion of knowledge Implications for developing countries Conclusions
Structures in which to study Global Production Systems
How to study global production networks?
How to explain spatially uneven development in capitalist economies?
Structures in which to study Global Production Systems
Historical Antecedents Key Concepts Relevance for the GPNframework in economic geography
Value chain frameworksince the early 1980s
• Stages of production• Competitive strategies• Competitive advantage
• Spatial (re)organization of production activities• Importance of value as a concept in GPN• Production as both manufacturing and service activities
Networks and embeddedness perspectives since the mid-
1980s
• Inter-organizational relations to business formation and performance• Intertwined relationships between economic action and social structures
• Lead firms and their embedded networks• Networks as relations stretching across space• Value creation, enhancement, and retention in networks
Actor-network analysissince the mid-1980s
• Heterogeneous relations• Control from a distance• Actants as humans and nonhumans
• Networks and relations as foundation in GPN analysis• Power relations among actors in GPNs
Global commodity andvalue chain analysissince the mid-1990s
• Commodity production as a sequential chain• Value creation in chain organization
• Spatial configurations of GPNs and economic development outcomes• Institutional influence on GPNs
National to international innovation systems
National Innovation Systems – the institutional determinants of learning, knowledge creation, and innovation
Assumptions:Innovation is essential for growth and welfareWant to gain as a nation
National to international innovation systems
National vs. International linkages
National:○ Nation contains a unique economic structure
Determines its specializationDetermines its path of innovationDetermines its linkages (both national and international)
National to international innovation systems
National vs. International linkages
International linkages of the host economy○ Suppliers to multi-national firms○ Licensed partners
National to international innovation systems
National vs. International linkages
Problem is that developing countries often lack linkages in their own country
So international linkages fill in the gaps○ R&D○ Production○ Supply
Mobility and diffusion of knowledge
Is innovation Immobile?
Mobility and diffusion of knowledge
Knowledge and innovation tend to move slower than production or financial flowsTacit knowledge – slowImplicit knowledge – fastDesire to keep information to sustain
competitive advantagesSynergy created from geographic clustering
Mobility and diffusion of knowledge
How then does knowledge and innovation move?
Unlike production, knowledge moves and concentrates in specific clusters (semi conductor industry)
Standardized production and implicit knowledgeHigh end production and tacit knowledge
Mobility and diffusion of knowledge
Mobility and diffusion of knowledge
Mobility and diffusion of knowledge
Advantages of location are important in determining knowledge flowsProduct Life Cycle○ Short – suppliers and assemblers need to locate
near one anotherImplication: advantages of clustering – (spillovers,
efficiency…)○ Long – no need for co location
Implication: more even geographic dispersion (take advantage of cheap labor etc…)
Mobility and diffusion of knowledge
Extension of these advantagesThrough time the knowledge flows through the
GPN○ Low end producers gain knowledge and produce
higher end products while outsourcing the lower end products (thus further extending the chain and moving up it themselves) Solectron
○ This is one way developing countries increase knowledge
Mobility and diffusion of knowledge
Disadvantages of location are important in determining knowledge flows (when the chain grows spatially)General:○ Delivery and distribution ○ Communication○ Demand fluctuation
International: ○ Political○ Managerial○ Inferior processes○ Exchange rate fluctuations
Mobility and diffusion of knowledge
Diffuse Cluster
•Standardized production
• Take advantage of cost savings
• Knowledge diffusion - slow
•High End Production
• Take advantage of knowledge spillovers
• Knowledge diffusion - quick
Mobility and diffusion of knowledge
How to deal with these problems:
Standardized processes can be located far away
Hi end production close (cluster advantages)
Production location near high growth markets
Implications for developing countries
Integration of developing countries into global production networks
Help the country– diffusion of knowledge
Hurt the country – erode competitive advantages
Implications for developing countries
Nation
Cluster
subsidiaryParent
CompanyKnowledge Flow
Knowledge Diffusion into a Developing Country
Implications for developing countries
Nation
Cluster
subsidiaryParent
CompanyKnowledge Flow
Knowledge Diffusion into a Developing Country
Implications for developing countries
Industrial upgrading – shifting to higher value added products and production stages through increasing specialization.
-Ernst 2001
1. Assumptions:○ Knowledge○ Innovation
Implications for developing countries
1. Specialization○ Inter-industry○ Inter-factorial○ Demand upgrade○ Functions upgrade
2. Identify links between ○ innovation○ Linkages
- specializations
3. Sustained Growth
Industrial Upgrading
Knowledge Innovation
Demand
UpgradesInter-IndustryFu
nctional
Upgrades
Inter-
Factorial
Innovation
linkagesspecialization
Sustained Growth
Implications for developing countries
Policy Roles for Government concerning integration of GPN’s
Globalization makes governments enact policies○ Investment policies○ Trade policies○ Targeted industrial development to take advantage of
specializations and competitive advantages
Not to do so would be detrimental○ vulnerability to MNC’s○ international financial fluctuations
Implications for developing countries
Interesting Theory: Intellectual property rights
Should developing countries encourage the diffusion of intellectual property? (i.e. weak property rights?) Then gradually increase protection as knowledge increases?
Conclusions
Global Production Networks and Developing Countries
Absorption of foreign ideas and knowledge
Reduce risk through diversification
Increase in knowledge leads to increase in innovation which leads to sustained growth