Multinational corporations and global value chains

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

Multinational corporation

An MNC, or multinational corporation, is a company that operates in multiple countries and has a global reach. These companies often significantly impact the global economy due to their size and reach. MNCs may own and manage production facilities in several different countries or have a more decentralized structure with various subsidiaries operating independently in different locations. MNCs can be involved in various industries, including manufacturing, technology, finance, and more. There are many examples of MNCs, such as General Electric, Coca-Cola, and Nestle.

According to Oatley, an MNC is a company that has ownership and manages production facilities in two or more countries. there are approximately 63459 parent firms that together own a total of 689520 foreign affiliates. These parent firms and their foreign affiliates account for about 25 per cent of the world's economic production and employ some 66 million people worldwide.

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 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

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 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

Multinational corporations (MNCs) can play a role in a liberal economic order by investing capital in countries where it is scarce and by transferring technology and management expertise from one country to another. This can promote the efficient allocation of resources in the global economy by allowing countries to specialize in producing goods and services in which they have a comparative advantage. MNCs can also help to stimulate economic growth in the host countries where they operate by creating jobs and increasing demand for local goods and services. However, MNCs can also negatively impact host countries by exploiting local resources, contributing to environmental degradation, and undermining local businesses.

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 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

Historical evolution

Multinational corporations (MNCs) have a long history dating back to at least the late 19th century when some European companies began establishing operations in other parts of the world. The evolution of MNCs has been shaped by various factors, including technological advances, changes in the global political and economic environment, and the actions of governments and other stakeholders.

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 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.

The first global economy period (1880-1929)

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 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.

Beginning of new global economy

During the period between 1930 and 1979, multinational corporations (MNCs) continued to play a significant role in the global economy. This period saw the rise of the United States as a dominant economic power, with many American MNCs establishing operations worldwide. However, MNCs also faced several challenges and controversies during this period, including accusations of exploiting local resources and labour, contributing to environmental degradation, and undermining the sovereignty of host countries.

The global economic environment changed significantly during this period, with the onset of the Great Depression in the 1930s and the aftermath of World War II in the 1940s and 1950s. These events led to adopting of various policies and regulations designed to promote international trade and investment, including the creation of international organizations such as the International Monetary Fund (IMF) and the World Bank.

The 1970s were marked by economic instability, rising tensions between the industrialized and developing worlds, and growing concerns about the environmental impacts of economic activity. These developments would shape the evolution of MNCs and the global economy in the following decades.

New global economy (from 1979)

Multinational corporations (MNCs) have played a significant role in the global economy since the 1980s. This period has been marked by the increasing integration of the world economy, with the expansion of international trade and investment and the growing interdependence of national economies. MNCs have been major drivers of this trend, 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. Some have argued that MNCs contribute to economic inequality and environmental degradation and undermine the sovereignty of host countries. As a result, governments and other stakeholders have sought to regulate the activities of MNCs and ensure that they operate responsibly and sustainably.

The global economic environment has undergone significant changes since the 1980s, including the collapse of the Soviet Union and the emergence of China as a major economic power. These developments have had important implications for MNCs and the global economy.

From hub-and-spokes to global value chains

The hub-and-spokes world

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.

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.

Free-standing companies, also known as independent or standalone companies, operate independently of any parent company or conglomerate. These types of companies may play an important role in various sectors of the economy, including manufacturing, service industries, and natural resource extraction.

Free-standing companies may have several advantages over companies that are part of a larger conglomerate. For example, they may have more flexibility and autonomy to make strategic decisions and adapt to changing market conditions. They may also focus more on specific products or service lines, making them more specialized and efficient.

However, free-standing companies may face challenges, such as limited access to capital and other resources, and may be more vulnerable to economic downturns or other external shocks. Therefore, it is important for free-standing companies to carefully consider the potential risks and benefits of operating independently and to develop strategies to mitigate potential risks.

According to some estimates, Latin America and the Caribbean received around one-third of global FDI flows in the early 21st century, while Asia received around one-fifth. These figures may have varied over time and would have been influenced by various factors, including economic conditions, political stability, and the level of development in host countries.

The United Kingdom (UK) has historically been a major source of FDI, with many UK-based MNCs establishing operations in other parts of the world. According to some estimates, the UK accounted for around 45% of global FDI flows in the early 20th century. However, the distribution of FDI across different source countries would have varied over time. Various factors, including the level of economic development, the availability of capital, and the competitive advantages of different countries, would have influenced it.

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 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 (GVCs) refer to the network of activities involved in the production and distribution of goods and services around the world. GVCs have evolved significantly over the past several decades, with a sharp decline in the share of the primary sector (such as agriculture and resource extraction) and a sharp growth in the share of manufacturing and services.

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 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.

Intradirect trade, or trade within a company between different affiliates or subsidiaries, has also increased significantly over the past several decades. According to some estimates, the share of intradirect trade in global trade increased from around 20% in the 1970s to more than 40% by the year 2000. This trend reflects the growing importance of MNCs in the global economy and their increasing reliance on complex and interdependent production networks.

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 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.

More recently, there has also been an increase in FDI outflows from China, as Chinese companies have sought to establish operations in other parts of the world and access new markets and resources. This trend reflects the growing economic power and global reach of Chinese companies and the increasing interdependence of the global economy.

The policy environment for multinational corporations (MNCs) has been shaped in part by the spread of regional trade agreements (RTAs) and bilateral investment treaties (BITs) in recent decades. RTAs are agreements between two or more countries to reduce trade barriers and promote regional economic integration. BITs are agreements between two countries to protect and encourage investment by nationals of one country in the other country.

RTAs and BITs can provide a favourable policy environment for MNCs by reducing barriers to trade and investment and establishing rules and protections that help to ensure a stable and predictable business environment. RTAs and BITs can also facilitate the flow of goods, services, and capital worldwide and contribute to the integration of global value chains (GVCs).

However, RTAs and BITs can also be controversial. Some critics argue that they can undermine the sovereignty of host countries, contribute to economic inequality, and negatively impact the environment and labour standards. As a result, the spread of RTAs and BITs has often been the subject of debate and controversy.

Evolution since 2008

There have been some developments in the global economy since the financial crisis of 2008 that have favoured developing countries in East Asia. These developments have included the continued growth of emerging markets, the increasing importance of developing countries in global value chains (GVCs), and the shifting patterns of international trade and investment.

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 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.

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.

Emerging market countries have increasingly become home bases for multinational corporations (MNCs) in recent decades. Many MNCs have established operations in these countries to take advantage of the growing market opportunities and to access specialized inputs and capabilities. Some of the emerging market countries that have become important home bases for MNCs include Hong Kong, China, South Korea, Singapore, Taiwan, Venezuela, Mexico, and Brazil.

According to some estimates, around 60 of the top 100 MNCs from developing countries are based in Southeast and East Asia, while another six are based in India. These MNCs have often focused on specific sectors of the economy, such as manufacturing, and have sought to expand their operations abroad to access new markets and resources.

Most developing world MNCs are considerably smaller than developed country MNCs, and only a small number of developing country MNCs ranked among the world's 100 largest MNCs in 2017. However, the number of developing country MNCs has been growing in recent years, and these companies are increasingly playing a more significant role in the global economy.

According to some estimates, China's FDI outflows increased from around 4.6 billion USD in 2000 to 216.4 billion USD in 2016. This trend reflects the growing economic power and global reach of Chinese companies and the increasing interdependence of the global economy.

Chinese companies have increasingly become major players in global value chains (GVCs) and have established operations in various sectors, including manufacturing, services, and natural resource extraction. Several factors, including advances in transportation and communication technologies, the liberalization of international trade and investment, and the growing economic importance of developing countries, have facilitated the expansion of Chinese FDI outflows.

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.

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.

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.

MNCs : Economic explanation

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:

1. To access new markets: MNCs may expand into new markets in order to access new customers and sources of revenue.
2. 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.
3. 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.
4. To diversify their operations: MNCs may expand into new markets to diversify their operations and reduce risk.
5. To build brand recognition and reputation: MNCs may expand into new markets to build recognition for their brand and reputation, which can help them attract new customers and partners.

According to the principles of neoclassical economics, international trade and cross-border transactions should occur when they are economically efficient, meaning that the parties involved can benefit from the exchange. In other words, cross-border transactions should happen when they increase total welfare or utility for the parties involved.

In practice, many factors can influence the decision to engage in international trade or cross-border transactions, including differences in resource endowments, technology, and the relative production costs between countries. When countries have comparative advantages in producing certain goods or services, it can be economically efficient for them to trade with each other, even if they could produce the goods or services themselves. This is because they can specialize in producing the goods or services in which they have a comparative advantage and trade for the goods or services in which they have a comparative disadvantage.

There are several alternative explanations for why multinational corporations (MNCs) expand into new markets and engage in cross-border transactions.

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:

1. 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.
2. Market-seeking: MNCs may expand into new markets to access new customers and sources of revenue.
3. Efficiency-seeking: MNCs may expand into new markets to take advantage of lower production costs or other efficiency advantages available in those markets.
4. 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.

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:

1. 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.
2. 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.
3. 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.
4. Specific assets: MNCs may have specific assets, such as patents, licenses, or specialised expertise, that give them a competitive advantage in certain markets. Expanding internationally can help them leverage these assets and capture additional value.

These market imperfections can incentivise MNCs to expand internationally and engage in cross-border transactions to capture additional value or reduce costs.

Global value chain

Origins

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 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.

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 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.

Global value chains (GVCs) emerged as a significant feature of the global economy in the 1970s, as countries began to shift away from import substitution industrialization (ISI) and developmentalism and towards more open and export-oriented economic policies. In addition, with the proliferation of free trade agreements and the liberalization of foreign direct investment (FDI) rules, firms began to look for more efficient and cost-effective ways to produce and distribute their products worldwide.

One of the key features of GVCs is the use of efficiency-seeking FDI, in which firms invest in foreign countries to take advantage of lower production costs and other efficiency gains. This type of FDI often involves the establishment of export-processing zones (EPZs) in developing countries, where firms can produce goods for export to developed countries. The EPZs provide a range of benefits to firms, including access to cheap labour, tax breaks, and streamlined customs procedures.

The emergence of GVCs and the use of efficiency-seeking FDI are often referred to as the "new international division of labour," as they have led to a significant shift in how international production is organized and value is created. Both FDI and offshoring (the practice of outsourcing production to foreign countries) are ways that firms can internationalize their production, and both are common features of GVCs.

The concept of global value chains (GVCs) have been hugely influential in scholarly circles and international organizations (IOs). In the academic world, GVCs have been widely studied by economists, political scientists, and other researchers, who have used the concept to understand better the dynamics of globalization and the organization of international production.

IOs such as the World Bank, the International Monetary Fund (IMF), and the World Trade Organization (WTO) have also been interested in GVCs, as they provide a framework for analyzing trade patterns and the role of different countries in the global economy. These organizations have used GVC data to inform policy recommendations and track trade and investment's impact on economic development.

The concept of GVCs has helped to shed light on the complex and interconnected nature of international production and how value is created in the global economy. As a result, it has become an important tool for scholars and policymakers seeking to understand the impacts and implications of globalization.

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:

1. The classical theories of international trade, focused on the role of comparative advantage in determining the trade patterns between countries.
2. 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.
3. 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.
4. The new economic sociology, focused on the role of social networks and institutions in shaping economic outcomes.
5. 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 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.

One of the key figures in the world-system tradition is Immanuel Wallerstein, who developed the concept of the "world system" to describe the global economic structure that has emerged since the 16th century. According to Wallerstein, the world system is divided into three main zones: the core, the periphery, and the semi-periphery. The core countries, typically industrialized and economically advanced, dominate the global economy and extract wealth from the periphery and semi-periphery countries.

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 labor.

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 global value chains (GVCs) framework was developed by Gary Gereffi, John Humphrey, and Timothy Sturgeon in 2005. It builds on the earlier global commodity chains (GCC) framework developed by Gereffi and incorporates insights from transaction cost economics.

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 forms of human and physical capital.

Typology

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 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.

binary typology in Gereffi's GCC framework : Producer driven and buyer driven commodity chains

PDCCs typical of capital intensive manufacturing industries such as automobile

BDCCs typical of consumer goods industries and retail (Wal-Mark key example)