Diverse paths of upgrading in high-tech manufacturing: Costa Rica in the electronics and medical devices global value chains

Abstract

Costa Rica has sought to improve its position in the global economy by prioritizing export growth in two high-tech manufacturing industries led by foreign direct investment (FDI): electronics and medical devices. We use a global value chain (GVC) perspective to identify key commonalities and contrasts in Costa Rica’s performance in upgrading these two sectors. Because the electronics and medical devices GVCs have very different structures in Costa Rica (electronics is dominated by a single large firm, Intel, whereas medical devices has a highly diversified set of foreign manufacturers), multiple forms of upgrading, downgrading and knowledge spillovers are possible. Although the experience of these two industries illustrates different paths to upgrading, developing backward linkages in Costa Rica was not the preferred nor the only way of moving up the value chain. The medical devices sector exhibited more traditional knowledge spillovers and labor market features of local industrial agglomerations, whereas the electronics sector demonstrated significant wage and skill-level gains because of the incorporation of high-value service activities due to the evolving global strategy of its GVC lead firm, Intel. By combining a GVC perspective with a focus on knowledge flows and value creation at the local level, we seek to promote more explicit integration of international business and economic geography concepts and methods.