From suppliers to nodes in global value chains: An upgradation of the ICT cluster of Pakistan through regional and national innovation systems.

Abstract

The bottom-level weaker position of developing countries industrial clusters in GVCs make them prone to the threats of non-compliance of international standards and power dominance by lead firm in GVCs as empirically evident from the traditional industrial clusters of Pakistan. In the context of sceptical literature on the upgrading of supplier firms in GVCs, this research argues that the GVC analysis is limited because the GVC approach takes a quite identifiable linear perspective because the main actors taken into account are firms along the value chain and the lack of attention to the institutional context within which local firms interacting in GVC are embedded. The main research question is how do the innovation systems at the regional and national level support industrial clustered firms in their ability to upgrade from a position of SUPPLIERS to NODES in GVC through the links with knowledge institutes embedded in ISs and GVCs. This research tests the hypotheses using an empirical study of the ICT clusters of Pakistan significantly agglomerated in the cities of Islamabad, Lahore and Karachi. The econometric analysis of cluster firms’ data shows that knowledge links with the knowledge institutes do not support the upgrading of firms in GVC. The policy implications for the upgradation of industrial clusters through the assessment of knowledge links is drawn for the other developing countries.