Modification de Multinational corporations and global value chains
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International political economy has become an ever-increasingly important topic in the world today. The rise of multinational corporations and global value chains has created a complex system that | International political economy has become an ever-increasingly important topic in the world today. The rise of multinational corporations and global value chains has created a complex system that has a direct impact on the world’s economy, politics, and culture. Through continued research and analysis of this phenomenon, we can gain a better understanding of the implications of multinational corporations and global value chains and their effects on the global economy. By looking at the structure, strategies, and operations of multinational corporations and global value chains, we can begin to get a better understanding of their influence on the international political economy. These insights can help us to better comprehend the interconnectivity of international markets and the potential impacts of multinational corporations and global value chains on the global economy. | ||
= Defining Multinational corporation, Foreign direct investment & Global value chain = | = Defining Multinational corporation, Foreign direct investment & Global value chain = | ||
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== Foreign direct investment == | == Foreign direct investment == | ||
Foreign direct investment (FDI) is a type of investment made by a company or individual in a foreign country. It typically involves establishing or acquiring | Foreign direct investment (FDI) is a type of investment made by a company or individual in a foreign country. It typically involves establishing a new business or acquiring an existing business in a foreign country. FDI can take many forms, including establishing a new factory or plant, acquiring a current company, or expanding an existing business into a new country. FDI is often made by multinational corporations, which are companies that operate in multiple countries. Individual investors or governments can also make it. FDI can significantly impact the host country's economy, as it can bring new investment, jobs, and technology to the local market. | ||
According to Oatley, foreign direct investment (FDI) is a form of cross-border investment in which a resident or corporation based in one country owns a productive asset located in a second country. Multinational corporations make such investments. FDI can involve the construction of a new or the purchase or an existing plant or factory | According to Oatley, foreign direct investment (FDI) is a form of cross-border investment in which a resident or corporation based in one country owns a productive asset located in a second country. Multinational corporations make such investments. FDI can involve the construction of a new or the purchase or an existing plant or factory | ||
== Global value chain == | == Global value chain == | ||
A global value chain (GVC) is a network of economic activities that involve the production and distribution of goods and services across different countries. It consists of the coordination of different stages of production, from raw materials to the final product, through a series of activities that different firms may carry out in other locations. These activities include sourcing raw materials, manufacturing, assembly, marketing, and distribution. The term "global value chain" describes the increasingly interconnected nature of the global economy and the complex networks of economic activity that span multiple countries. | A global value chain (GVC) is a network of economic activities that involve the production and distribution of goods and services across different countries. It consists of the coordination of different stages of production, from raw materials to the final product, through a series of activities that different firms may carry out in other locations. These activities include sourcing raw materials, manufacturing, assembly, marketing, and distribution. The term "global value chain" describes the increasingly interconnected nature of the global economy and the complex networks of economic activity that span multiple countries. | ||
A value chain can refer to the series of activities involved in creating a product or service, which can be contained within a geographic location or even a firm. However, a global value chain involves coordinating these activities across multiple countries and firms. It is a way of organizing economic activity that allows firms to specialize in certain stages of production and take advantage of differences in the cost and availability of inputs and labour across different countries. The GVC initiative aims to study these complex networks of economic activity and understand how they contribute to the global economy. | A value chain can refer to the series of activities involved in creating a product or service, which can be contained within a single geographic location or even a single firm. However, a global value chain involves coordinating these activities across multiple countries and firms. It is a way of organizing economic activity that allows firms to specialize in certain stages of production and take advantage of differences in the cost and availability of inputs and labour across different countries. The GVC initiative aims to study these complex networks of economic activity and understand how they contribute to the global economy. | ||
= Liberal view vs Alter-globalization view = | = Liberal view vs Alter-globalization view = | ||
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== Alter-globalization view == | == Alter-globalization view == | ||
The alter-globalization perspective views multinational corporations (MNCs) as instruments of capitalist domination, arguing that they often exert significant control over critical sectors of the economies of their host countries. This can enable MNCs to | The alter-globalization perspective views multinational corporations (MNCs) as instruments of capitalist domination, arguing that they often exert significant control over critical sectors of the economies of their host countries. This can enable MNCs to make decisions about using resources with little regard for the host country's needs and its people. MNCs may also seek to weaken labour and environmental standards to increase profits, which can negatively impact workers and the natural environment in the host countries where they operate. Critics of MNCs argue that they can contribute to economic inequality and social unrest in host countries by concentrating wealth and power in the hands of a few. Therefore, it is essential for governments and other stakeholders to consider the potential benefits and costs of MNCs carefully and to take steps to ensure that they operate responsibly and sustainably. | ||
= Multinational corporations = | = Multinational corporations = | ||
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During the late 19th and early 20th centuries, MNCs were primarily focused on extracting raw materials and establishing production facilities in developing countries. However, many MNCs also played a role in European powers' colonization of various parts of the world. | During the late 19th and early 20th centuries, MNCs were primarily focused on extracting raw materials and establishing production facilities in developing countries. However, many MNCs also played a role in European powers' colonization of various parts of the world. | ||
After World War II, MNCs began to play a more significant role in the global economy as barriers to international trade and investment began to decline. This period also saw the rise of the United States as a dominant economic power, with many American MNCs establishing operations | After World War II, MNCs began to play a more significant role in the global economy as barriers to international trade and investment began to decline. This period also saw the rise of the United States as a dominant economic power, with many American MNCs establishing operations around the world. | ||
In the late 20th and early 21st centuries, MNCs continued to expand their operations globally, often taking advantage of advances in transportation, communication, and information technology to facilitate the flow of goods, services, and capital worldwide. However, the activities of MNCs have also been the subject of controversy and criticism, with some arguing that they contribute to economic inequality and environmental degradation and undermine the sovereignty of host countries. | In the late 20th and early 21st centuries, MNCs continued to expand their operations globally, often taking advantage of advances in transportation, communication, and information technology to facilitate the flow of goods, services, and capital worldwide. However, the activities of MNCs have also been the subject of controversy and criticism, with some arguing that they contribute to economic inequality and environmental degradation and undermine the sovereignty of host countries. | ||
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During the first global economy period between 1880 and 1929, multinational corporations (MNCs) played a significant role in the global economy. Many MNCs were focused on extracting raw materials and establishing production facilities in developing countries, often with the support of colonial powers. MNCs also played a role in the globalization of financial markets as they sought to raise capital from international investors to fund their operations. | During the first global economy period between 1880 and 1929, multinational corporations (MNCs) played a significant role in the global economy. Many MNCs were focused on extracting raw materials and establishing production facilities in developing countries, often with the support of colonial powers. MNCs also played a role in the globalization of financial markets as they sought to raise capital from international investors to fund their operations. | ||
The rise of MNCs during this period was facilitated by advances in transportation, communication, and other technologies, which made it easier for companies to operate across national borders. MNCs also benefited from declining barriers to international trade and investment and | The rise of MNCs during this period was facilitated by advances in transportation, communication, and other technologies, which made it easier for companies to operate across national borders. MNCs also benefited from declining barriers to international trade and investment and favorable legal and regulatory frameworks in many countries. | ||
However, the activities of MNCs during this period were subject to controversy. MNCs were often accused of exploiting local resources and labour, contributing to environmental degradation, and undermining the sovereignty of host countries. These issues would continue to be a source of tension and debate in the following decades. | However, the activities of MNCs during this period were subject to controversy. MNCs were often accused of exploiting local resources and labour, contributing to environmental degradation, and undermining the sovereignty of host countries. These issues would continue to be a source of tension and debate in the following decades. | ||
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The term "hub-and-spokes" is often used to describe a pattern of economic interdependence in which a central hub country controls access to a group of smaller, peripheral countries, also known as "spokes." This type of economic arrangement is often associated with multinational corporations (MNCs), which may use their economic power to influence the policies and practices of host countries. | The term "hub-and-spokes" is often used to describe a pattern of economic interdependence in which a central hub country controls access to a group of smaller, peripheral countries, also known as "spokes." This type of economic arrangement is often associated with multinational corporations (MNCs), which may use their economic power to influence the policies and practices of host countries. | ||
In a hub-and-spokes system, the hub country may serve as a hub for producing, distributing, and financing goods and services. In contrast, the spokes countries may specialize in producing raw materials or intermediate goods. The hub country may also exert influence over the policies and practices of the spokes countries through trade agreements, investment, and other means. | |||
Critics of the hub-and-spokes model argue that it can contribute to economic inequality and may undermine the sovereignty of the spoke countries. Some have called for more balanced and equitable economic relationships between countries rather than the concentration of economic power in a few hub countries. | Critics of the hub-and-spokes model argue that it can contribute to economic inequality and may undermine the sovereignty of the spoke countries. Some have called for more balanced and equitable economic relationships between countries rather than the concentration of economic power in a few hub countries. | ||
A significant portion of global FDI around 1914 was focused on natural resources and services, such as financing, insuring, transporting commodities, and foodstuffs. This is because various factors | A significant portion of global FDI around 1914 was focused on natural resources and services, such as financing, insuring, transporting commodities, and foodstuffs. This is because various factors, including the availability of natural resources, the level of economic development in host countries, and the demand for particular goods and services, have historically driven FDI. | ||
In the early 20th century, many multinational corporations (MNCs) were focused on extracting raw materials and establishing production facilities in developing countries. Advances in transportation, communication, and other technologies and declining barriers to international trade and investment facilitated this. However, MNCs also played a role in other sectors of the economy, such as manufacturing, and the distribution of FDI across different sectors would have varied depending on the specific circumstances of each country. | In the early 20th century, many multinational corporations (MNCs) were focused on extracting raw materials and establishing production facilities in developing countries. Advances in transportation, communication, and other technologies and declining barriers to international trade and investment facilitated this. However, MNCs also played a role in other sectors of the economy, such as manufacturing, and the distribution of FDI across different sectors would have varied depending on the specific circumstances of each country. | ||
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In the late 19th and early 20th centuries, the policy environment for multinational corporations (MNCs) was often based on the legalization of extraterritorial rights and the recognition of full property rights for foreign investors. This was facilitated by treaties and other agreements that granted MNCs certain privileges and protections when operating in foreign countries. | In the late 19th and early 20th centuries, the policy environment for multinational corporations (MNCs) was often based on the legalization of extraterritorial rights and the recognition of full property rights for foreign investors. This was facilitated by treaties and other agreements that granted MNCs certain privileges and protections when operating in foreign countries. | ||
The legal recognition of extraterritorial rights allowed MNCs to operate in host countries | The legal recognition of extraterritorial rights allowed MNCs to operate in host countries with a degree of independence from local laws and regulations. This could include the right to establish their own courts and resolve disputes with host governments and other parties through arbitration or other international legal processes. | ||
The recognition of full property rights for foreign investors also includes the right to acquire land and other assets in host countries and the right to sell or dispose of these assets at will. | |||
=== Global value chains === | === Global value chains === | ||
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According to some estimates, the share of manufacturing and services in GVCs increased from around 25% in the 1970s to over 50% by 2000. This shift reflects many factors, including technological advances, changes in the global economic environment, and the evolution of international trade and investment patterns. | According to some estimates, the share of manufacturing and services in GVCs increased from around 25% in the 1970s to over 50% by 2000. This shift reflects many factors, including technological advances, changes in the global economic environment, and the evolution of international trade and investment patterns. | ||
Various factors, including the increasing integration of the world economy, the decline of barriers to international trade and investment, and the increasing importance of knowledge-based industries, have driven manufacturing and services | Various factors, including the increasing integration of the world economy, the decline of barriers to international trade and investment, and the increasing importance of knowledge-based industries, have driven the growth of manufacturing and services in GVCs. These trends have had important implications for the global economy and have shaped the evolution of multinational corporations (MNCs) and other economic actors. | ||
Multinational corporations (MNCs) have been the dominant organizational form in the global economy for many years and have played a significant role in the evolution of global value chains (GVCs). MNCs have often used outsourcing and other forms of externalization to access specialized inputs and capabilities, and they have engaged in increasingly complex and interdependent production networks. | Multinational corporations (MNCs) have been the dominant organizational form in the global economy for many years and have played a significant role in the evolution of global value chains (GVCs). MNCs have often used outsourcing and other forms of externalization to access specialized inputs and capabilities, and they have engaged in increasingly complex and interdependent production networks. | ||
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The growth of intradirect trade and the increasing importance of GVCs have been driven by various factors, including technological advances, changes in the global economic environment, and the evolution of international trade and investment patterns. These trends have had important implications for the global economy and have shaped the evolution of MNCs and other economic actors. | The growth of intradirect trade and the increasing importance of GVCs have been driven by various factors, including technological advances, changes in the global economic environment, and the evolution of international trade and investment patterns. These trends have had important implications for the global economy and have shaped the evolution of MNCs and other economic actors. | ||
Foreign direct investment (FDI) stocks (i.e., the total accumulated value of foreign investments in a country) have historically been concentrated in North America, Europe, and Japan, reflecting the economic dominance of these regions in the global economy. However, there has been a striking rise in FDI flows into China in recent decades. As a result, the country has emerged as a major economic power and attracted significant investment abroad. | Foreign direct investment (FDI) stocks (i.e., the total accumulated value of foreign investments in a country) have historically been concentrated in North America, Europe, and Japan, reflecting the economic dominance of these regions in the global economy. However, there has been a striking rise in FDI flows into China in recent decades. As a result, the country has emerged as a major economic power and has attracted significant investment from abroad. | ||
According to some estimates, China has received a large share of global FDI flows in recent years as foreign companies have sought to take advantage of the country's large and growing market, low-cost labour, and other factors that make it an attractive destination for investment. | According to some estimates, China has received a large share of global FDI flows in recent years as foreign companies have sought to take advantage of the country's large and growing market, low-cost labour, and other factors that make it an attractive destination for investment. | ||
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Emerging markets, including many countries in East Asia, have experienced strong economic growth in recent years, and this has contributed to an increase in demand for goods and services from these countries. As a result, many multinational corporations (MNCs) have sought to establish or expand operations in these markets to take advantage of the growing opportunities. | Emerging markets, including many countries in East Asia, have experienced strong economic growth in recent years, and this has contributed to an increase in demand for goods and services from these countries. As a result, many multinational corporations (MNCs) have sought to establish or expand operations in these markets to take advantage of the growing opportunities. | ||
Developing countries in East Asia have also become more important players in GVCs, as they have increasingly specialized in producing intermediate goods and services used | Developing countries in East Asia have also become more important players in GVCs, as they have increasingly specialized in producing intermediate goods and services that are used in producing final goods. This has contributed to the global economy's integration and facilitated the flow of goods, services, and capital around the world. | ||
The distribution of foreign direct investment (FDI) among different regions has changed significantly over the past several decades. According to some estimates, the United States, Europe, and Japan represented around 90% of global FDI flows in the 1980s. This share declined to around 80% between 1990 and 2009 and decreased to around 60% between 2010 and 2016. | The distribution of foreign direct investment (FDI) among different regions has changed significantly over the past several decades. According to some estimates, the United States, Europe, and Japan represented around 90% of global FDI flows in the 1980s. This share declined to around 80% between 1990 and 2009 and decreased to around 60% between 2010 and 2016. | ||
This shift reflects | This shift reflects a number of factors, including the rise of Asian multinational corporations (MNCs) as important foreign investors and the increasing economic importance of developing countries in the global economy. Many Asian MNCs have sought to expand their operations abroad and become major global value chains (GVCs) players. This has contributed to the growing importance of developing countries in the global economy and has led to a shift in the balance of economic power towards these regions. | ||
The changing distribution of FDI among different regions of the world has had important implications for MNCs and other economic actors. It reflects the increasing interdependence of the global economy. | The changing distribution of FDI among different regions of the world has had important implications for MNCs and other economic actors. It reflects the increasing interdependence of the global economy. | ||
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== Regional multinationals == | == Regional multinationals == | ||
Regional multinationals, also known as "multilocal" or "regionalized" multinationals, are companies that operate on a global scale but focus on a particular region or geographic area. These companies often have a decentralized organizational structure, with operations and decision-making power being delegated to local subsidiaries in each region. This allows them to tailor their products and services to the specific needs and preferences of the local market while still leveraging the resources and expertise of the global organization. Regional multinationals can be contrasted with "global" multinationals, which have a more centralized organizational structure and tend to standardize their products and operations across different regions. | Regional multinationals, also known as "multilocal" or "regionalized" multinationals, are companies that operate on a global scale but focus on a particular region or geographic area. These companies often have a decentralized organizational structure, with operations and decision-making power being delegated to local subsidiaries in each region. This allows them to tailor their products and services to the specific needs and preferences of the local market, while still leveraging the resources and expertise of the global organization. Regional multinationals can be contrasted with "global" multinationals, which have a more centralized organizational structure and tend to standardize their products and operations across different regions. | ||
Alan Rugman's theory of regional multinationals is based on the idea that | Alan Rugman's theory of regional multinationals is based on the idea that the majority of multinational corporations (MNCs) are actually regional in scope, rather than truly global. According to Rugman, most MNCs operate in a limited number of regions or countries, focusing on serving the specific needs of those markets rather than trying to standardize their operations across the globe. | ||
In his research, Rugman analyzed firm-level data from the 2011 Fortune Global 500 list and found that 320 out of the 380 companies on the list could be classified as regional MNCs, while only 9 out of the 380 companies could be classified as "global" MNCs. This suggests that most MNCs have a more decentralized, regionally-focused organizational structure and operate in a limited number of regions or countries. | In his research, Rugman analyzed firm-level data from the 2011 Fortune Global 500 list and found that 320 out of the 380 companies on the list could be classified as regional MNCs, while only 9 out of the 380 companies could be classified as "global" MNCs. This suggests that most MNCs have a more decentralized, regionally-focused organizational structure and operate in a limited number of regions or countries. | ||
The majority of multinational corporations (MNCs) had a regional focus, with 80% of MNCs classified as regional and only 4% classified as global. Additionally, the average score for regional sales and assets for these MNCs was 70% for sales and 72% for assets during the period from 1999-2008. | |||
Most multinational corporations (MNCs) from 1999-2008 had a regional focus, with most of their sales and assets concentrated in specific regions or geographic areas. This suggests that these MNCs were primarily focused on serving the needs of local markets rather than trying to standardize their products and operations across the globe. | Most multinational corporations (MNCs) from 1999-2008 had a regional focus, with most of their sales and assets concentrated in specific regions or geographic areas. This suggests that these MNCs were primarily focused on serving the needs of local markets, rather than trying to standardize their products and operations across the globe. | ||
== MNCs : Economic explanation == | == MNCs : Economic explanation == | ||
=== Why do MNCs exist in the first place? === | === Why do MNCs exist in the first place ? === | ||
Multinational corporations (MNCs) exist for a variety of reasons. Some of the primary reasons why MNCs are created and operate include: | Multinational corporations (MNCs) exist for a variety of reasons. Some of the primary reasons why MNCs are created and operate include: | ||
# To access new markets: MNCs may expand into new markets to access new customers and sources of revenue. | # To access new markets: MNCs may expand into new markets in order to access new customers and sources of revenue. | ||
# To take advantage of economies of scale: MNCs can often produce goods and services more efficiently due to their larger scale of operation and may expand into new markets to take advantage of these economies of scale. | # To take advantage of economies of scale: MNCs can often produce goods and services more efficiently due to their larger scale of operation and may expand into new markets to take advantage of these economies of scale. | ||
# To access new sources of raw materials or labour: MNCs may expand into new regions or countries to access cheaper sources of raw materials or labour, which can help reduce their production costs. | # To access new sources of raw materials or labour: MNCs may expand into new regions or countries to access cheaper sources of raw materials or labour, which can help reduce their production costs. | ||
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One approach that has been widely used to explain the motivations and activities of MNCs is John Dunning's "eclectic theory of international production," which identifies four sets of locational advantages that can drive international expansion: | One approach that has been widely used to explain the motivations and activities of MNCs is John Dunning's "eclectic theory of international production," which identifies four sets of locational advantages that can drive international expansion: | ||
# Natural-resource seeking: MNCs may expand into new markets to access natural resources, such as oil, minerals, or timber, that are not available in their home country. | # Natural-resource seeking: MNCs may expand into new markets in order to access natural resources, such as oil, minerals, or timber, that are not available in their home country. | ||
# Market-seeking: MNCs may expand into new markets to access new customers and sources of revenue. | # Market-seeking: MNCs may expand into new markets to access new customers and sources of revenue. | ||
# Efficiency-seeking: MNCs may expand into new markets to take advantage of lower production costs or other efficiency advantages available in those markets. | # Efficiency-seeking: MNCs may expand into new markets to take advantage of lower production costs or other efficiency advantages available in those markets. | ||
# Strategic-asset seeking: MNCs may expand into new markets to acquire strategic assets, such as technology, intellectual property, or local firms, that can help them improve their competitive position. | # Strategic-asset seeking: MNCs may expand into new markets in order to acquire strategic assets, such as technology, intellectual property, or local firms, that can help them improve their competitive position. | ||
These sets of locational advantages can often overlap and interact with each other, and MNCs may be motivated by multiple factors when making decisions about international expansion. | These sets of locational advantages can often overlap and interact with each other, and MNCs may be motivated by multiple factors when making decisions about international expansion. | ||
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Another set of alternative explanations for why multinational corporations (MNCs) expand into new markets and engage in cross-border transactions is based on the idea that market imperfections can create incentives for MNCs to expand internationally. These market imperfections can include: | Another set of alternative explanations for why multinational corporations (MNCs) expand into new markets and engage in cross-border transactions is based on the idea that market imperfections can create incentives for MNCs to expand internationally. These market imperfections can include: | ||
# Horizontal integration: MNCs may expand internationally to integrate their operations horizontally, meaning that they can produce a wider range of goods or services in different locations, which can help them capture economies of scale and reduce costs. | # Horizontal integration: MNCs may expand internationally in order to integrate their operations horizontally, meaning that they can produce a wider range of goods or services in different locations, which can help them capture economies of scale and reduce costs. | ||
# Intangible assets: MNCs may have intangible assets, such as brand recognition, intellectual property, or technology, that give them a competitive advantage in certain markets. Expanding internationally can help them leverage these assets and capture additional value. | # Intangible assets: MNCs may have intangible assets, such as brand recognition, intellectual property, or technology, that give them a competitive advantage in certain markets. Expanding internationally can help them leverage these assets and capture additional value. | ||
# Vertical integration: MNCs may expand internationally to integrate their operations vertically, meaning they can control different stages of the production process in different locations. This can help them reduce costs and improve coordination between different parts of the supply chain. | # Vertical integration: MNCs may expand internationally to integrate their operations vertically, meaning they can control different stages of the production process in different locations. This can help them reduce costs and improve coordination between different parts of the supply chain. | ||
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The global value chain (GVC) concept is a way to understand how international production is organized and how value is added in different locations around the world. It is often used in the context of globalization and the fourth stage of capitalism, characterized by the increasing integration of national economies into the global economy through trade, investment, and other forms of economic exchange. | The global value chain (GVC) concept is a way to understand how international production is organized and how value is added in different locations around the world. It is often used in the context of globalization and the fourth stage of capitalism, characterized by the increasing integration of national economies into the global economy through trade, investment, and other forms of economic exchange. | ||
In the GVC framework, value is created through a series of activities spread across different locations. For example, a product might be designed in one country, manufactured in another, and assembled in a third. Each of these activities represents a different stage in the value chain, and the value of the final product is the sum of the value added at each stage. | In the GVC framework, value is created through a series of activities that are spread out across different locations. For example, a product might be designed in one country, manufactured in another, and assembled in a third. Each of these activities represents a different stage in the value chain, and the value of the final product is the sum of the value added at each stage. | ||
The GVC concept helps to explain how international production is organized and how value is created in the global economy. It also highlights the importance of understanding the relationships between firms and their suppliers and the role of intermediaries such as logistics providers and trade finance institutions. | The GVC concept helps to explain how international production is organized and how value is created in the global economy. It also highlights the importance of understanding the relationships between firms and their suppliers and the role of intermediaries such as logistics providers and trade finance institutions. | ||
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In the earlier stages of globalization, international production was often driven by the search for natural resources and market access. For example, in the classical era, European firms established colonies in Africa, Asia, and the Americas to gain access to raw materials such as timber, rubber, and minerals. These raw materials were then shipped back to Europe, where they were processed and manufactured into finished goods. | In the earlier stages of globalization, international production was often driven by the search for natural resources and market access. For example, in the classical era, European firms established colonies in Africa, Asia, and the Americas to gain access to raw materials such as timber, rubber, and minerals. These raw materials were then shipped back to Europe, where they were processed and manufactured into finished goods. | ||
During the era of import substitution industrialization (ISI) and national developmentalism, international production was often driven by the desire to bypass tariffs and other trade barriers. As a result, firms would establish operations in other countries to take advantage of lower labour and production costs and sell their products in | During the era of import substitution industrialization (ISI) and national developmentalism, international production was often driven by the desire to bypass tariffs and other trade barriers. As a result, firms would establish operations in other countries to take advantage of lower labour costs and production costs and sell their products in those countries' domestic markets. | ||
In both of these earlier stages, international production was often characterized by a linear value chain, with firms in developed countries sourcing raw materials from developing countries and then exporting finished goods back to those same countries. However, with the emergence of the global value chain concept, international production has become more complex and interconnected, with value being added at multiple stages and in multiple locations around the world. | In both of these earlier stages, international production was often characterized by a linear value chain, with firms in developed countries sourcing raw materials from developing countries and then exporting finished goods back to those same countries. However, with the emergence of the global value chain concept, international production has become more complex and interconnected, with value being added at multiple stages and in multiple locations around the world. | ||
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According to Jennifer Bair, an expert on global value chains (GVCs), the intellectual genealogy of the GVC concept can be traced back to several different sources. These include: | According to Jennifer Bair, an expert on global value chains (GVCs), the intellectual genealogy of the GVC concept can be traced back to several different sources. These include: | ||
# The classical theories of international trade focused on the role of comparative advantage in determining the trade patterns between countries. | # The classical theories of international trade, focused on the role of comparative advantage in determining the trade patterns between countries. | ||
# The work of economist Alfred D. Chandler, Jr., who wrote about the evolution of the multinational corporation (MNC) and the firm's role in organizing international production. | # The work of economist Alfred D. Chandler, Jr., who wrote about the evolution of the multinational corporation (MNC) and the firm's role in organizing international production. | ||
# The world system theories looked at the relationships between core, periphery, and semi-periphery countries and the role of global economic structures in shaping economic development. | # The world system theories looked at the relationships between core, periphery, and semi-periphery countries and the role of global economic structures in shaping economic development. | ||
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# The work of economists Gary Gereffi and Miguel Korzeniewicz, who developed the concept of GVCs as a way to understand the organization of international production in the global economy. | # The work of economists Gary Gereffi and Miguel Korzeniewicz, who developed the concept of GVCs as a way to understand the organization of international production in the global economy. | ||
The GVC concept has evolved over time, drawing on a range of intellectual traditions and disciplines to provide a comprehensive framework for understanding the global economy. | The GVC concept has evolved over time, drawing on a range of intellectual traditions and disciplines in order to provide a comprehensive framework for understanding the global economy. | ||
The world-system tradition is a framework for analyzing the global division of labour and the patterns of trade and production that have emerged since the emergence of capitalism. This tradition is characterized by a focus on macro-level and long-range historical analysis, and it has influenced our understanding of the organization of the global economy. | The world-system tradition is a framework for analyzing the global division of labour and the patterns of trade and production that have emerged since the emergence of capitalism. This tradition is characterized by a focus on macro-level and long-range historical analysis, and it has influenced our understanding of the organization of the global economy. | ||
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The world-system tradition has also been influential in developing the concept of commodity chains, which describe the networks of production, trade, and distribution that link together different countries and regions worldwide. The global division of labour, which refers to the way that different countries specialize in different stages of the production process, is a key feature of commodity chains and has been a central focus of research within the world-system tradition. | The world-system tradition has also been influential in developing the concept of commodity chains, which describe the networks of production, trade, and distribution that link together different countries and regions worldwide. The global division of labour, which refers to the way that different countries specialize in different stages of the production process, is a key feature of commodity chains and has been a central focus of research within the world-system tradition. | ||
The global commodity chains (GCC) framework was developed by Gary Gereffi, a sociologist and economist, in the mid-1990s. It is a blend of organizational sociology and comparative development studies. It is designed to provide a comprehensive framework for understanding the organization of international production and the global division of | The global commodity chains (GCC) framework was developed by Gary Gereffi, a sociologist and economist, in the mid-1990s. It is a blend of organizational sociology and comparative development studies. It is designed to provide a comprehensive framework for understanding the organization of international production and the global division of labor. | ||
The GCC framework is based on global value chains (GVCs), which describe the production, trade, and distribution networks that link together countries and regions worldwide. According to Gereffi, GVCs are characterized by a series of activities, such as design, production, and distribution, that are spread out across different locations and that add value to a final product. | The GCC framework is based on the concept of global value chains (GVCs), which describe the production, trade, and distribution networks that link together different countries and regions worldwide. According to Gereffi, GVCs are characterized by a series of activities, such as design, production, and distribution, that are spread out across different locations and that add value to a final product. | ||
The GCC framework is widely used in research on globalization and international trade. It has influenced our understanding of the roles played by different countries and firms in the global economy. It highlights the importance of understanding the relationships between firms and their suppliers and the role of intermediaries such as logistics providers and trade finance institutions. | The GCC framework is widely used in research on globalization and international trade. It has influenced our understanding of the roles played by different countries and firms in the global economy. It highlights the importance of understanding the relationships between firms and their suppliers and the role of intermediaries such as logistics providers and trade finance institutions. | ||
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Like the GCC framework, the GVC framework provides a comprehensive understanding of the organization of international production and the global division of labour. In addition, it emphasizes the importance of understanding the relationships between firms and their suppliers and the role of intermediaries such as logistics providers and trade finance institutions. | Like the GCC framework, the GVC framework provides a comprehensive understanding of the organization of international production and the global division of labour. In addition, it emphasizes the importance of understanding the relationships between firms and their suppliers and the role of intermediaries such as logistics providers and trade finance institutions. | ||
The GVC framework also incorporates the concept of "upgrading," which refers to the process by which firms and countries move up the value chain by increasing the sophistication and value of their products and services. According to Gereffi and his colleagues, upgrading is an important factor in economic development. It can be facilitated through investments in education, technology, and other human and physical capital | The GVC framework also incorporates the concept of "upgrading," which refers to the process by which firms and countries move up the value chain by increasing the sophistication and value of their products and services. According to Gereffi and his colleagues, upgrading is an important factor in economic development. It can be facilitated through investments in education, technology, and other forms of human and physical capital. | ||
== Typology == | == Typology == | ||
The global commodity chain framework analyses the | The global commodity chain framework analyses the production, distribution, and consumption of goods and services in the global economy. It highlights the various stages of production that a commodity goes through, from raw materials to final consumption, and the complex network of economic, social, and political relationships that link these stages. The framework examines the various actors involved in the global economy, including multinational corporations, states, labour unions, and other organizations, and how they interact to produce, distribute, and consume goods and services. The global commodity chain framework can analyze a wide range of commodities, including manufactured goods, agricultural products, and natural resources, and examine globalisation's impacts on economic development, labour markets, and the environment. | ||
The global commodity chain (GCC) framework, developed by economist Gary Gereffi, analyses the | The global commodity chain (GCC) framework, developed by economist Gary Gereffi, analyses the production, distribution, and consumption of goods and services in the global economy. It emphasizes the role of firms and their activities in producing goods and services rather than the overall dynamics of capitalism. Gereffi argues that the GCC framework is a more useful way of understanding the global economy than the world-systems perspective, which focuses on the overall dynamics of capitalism and the interactions between core, semi-peripheral, and peripheral regions. | ||
Gereffi also argues that the GCC framework is more relevant for understanding the global economy in the post-1970s period when many developing countries (DCs) began to open up their economies and participate in global production networks. This is because the GCC framework emphasizes the importance of understanding the activities of firms within specific sectors and how they are connected through production networks rather than focusing on the overall dynamics of the global economy. | Gereffi also argues that the GCC framework is more relevant for understanding the global economy in the post-1970s period when many developing countries (DCs) began to open up their economies and participate in global production networks. This is because the GCC framework emphasizes the importance of understanding the activities of firms within specific sectors and how they are connected through production networks rather than focusing on the overall dynamics of the global economy. | ||
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Buyer-driven commodity chains (BDCCs) are more common in consumer goods industries and retail, where the firms at the end of the chain have a strong bargaining position due to their ability to specify the requirements of the products and their access to technology and capital. In addition, in these industries, the firms at the end of the chain are often able to exert a high level of control over the production process and the terms of trade due to their ability to set the standards and specifications for the products being produced and their access to consumer markets. | Buyer-driven commodity chains (BDCCs) are more common in consumer goods industries and retail, where the firms at the end of the chain have a strong bargaining position due to their ability to specify the requirements of the products and their access to technology and capital. In addition, in these industries, the firms at the end of the chain are often able to exert a high level of control over the production process and the terms of trade due to their ability to set the standards and specifications for the products being produced and their access to consumer markets. | ||
One example of a firm that is often cited as having a significant role in shaping a BDCC is Walmart. As one of the world's largest retailers, Walmart can specify the requirements for the products it sells and negotiate directly with suppliers to ensure that these requirements are met. This gives it a strong bargaining position in the commodity chain and allows it to exert a high level of control over the production process and the terms of trade. However, it is important to note that not all consumer goods industries or retail firms will necessarily have a BDCC structure, and various factors can influence the specific structure of a commodity chain. | One example of a firm that is often cited as having a significant role in shaping a BDCC is Walmart. As one of the world's largest retailers, Walmart can specify the requirements for the products it sells and negotiate directly with suppliers to ensure that these requirements are met. This gives it a strong bargaining position in the commodity chain, and allows it to exert a high level of control over the production process and the terms of trade. However, it is important to note that not all consumer goods industries or retail firms will necessarily have a BDCC structure, and various factors can influence the specific structure of a commodity chain. | ||
The binary typology of producer-driven versus buyer-driven commodity chains (PDCCs and BDCCs) has been criticized for oversimplifying the complex governance structures within a commodity chain. While the typology is useful for highlighting the different power dynamics within a commodity chain, it can also obscure some of the more nuanced and diverse governance structures that may be present. | The binary typology of producer-driven versus buyer-driven commodity chains (PDCCs and BDCCs) has been criticized for oversimplifying the complex governance structures within a commodity chain. While the typology is useful for highlighting the different power dynamics within a commodity chain, it can also obscure some of the more nuanced and diverse governance structures that may be present. | ||
One criticism of the typology is that it tends to emphasize the role of firms at the beginning and end of the chain while downplaying the importance of other actors such as labour unions, states, and civil society organizations. These actors can have a significant influence on the governance of a commodity chain and may be able to challenge or mitigate the power of firms at the beginning or end of the chain. | One criticism of the typology is that it tends to emphasize the role of firms at the beginning and end of the chain while downplaying the importance of other actors such as labour unions, states, and civil society organizations. These actors can have a significant influence on the governance of a commodity chain, and may be able to challenge or mitigate the power of firms at the beginning or end of the chain. | ||
Another criticism of the typology is that it tends to be static, focusing on the governance structure at a single point rather than considering how it may change over time. However, the governance structure of a commodity chain can be influenced by various factors, including technological change, shifts in the global economy, and the actions of various actors. Over time, a commodity chain can change from producer-driven to buyer-driven (or vice versa). | Another criticism of the typology is that it tends to be static, focusing on the governance structure at a single point rather than considering how it may change over time. However, the governance structure of a commodity chain can be influenced by various factors, including technological change, shifts in the global economy, and the actions of various actors. Over time, a commodity chain can change from producer-driven to buyer-driven (or vice versa). | ||
= Annexes = | = Annexes = |