Global production networks: A geographical review of a research tradition

Through a case study of the Irish software industry, this article explores how an industry and region that was ‘locked in’ to a dependent relationship of routine production within the global software production network managed to partially move up the production and technology chain to develop more sophisticated operations among foreign firms and in the Irish‐owned sector. Relations within production networks tend to become institutionalized and self‐reproducing. Firms and territories tend to remain locked in to a particular niche, in the absence of a ‘development project’ or coalition that mobilizes resources and cooperation to generate a push into a niche further up the network hierarchy. The push for moving up the network comes when a marginalized or vulnerable group within or on the edges of the network makes an alliance with supportive public agencies. Global production networks institutionalize hierarchical relations, but it remains possible for developmental coalitions to mobilize around the connections and resources within those networks to enter new niches further up these hierarchies. In practice, this requires a concerted and ongoing state policy of industrial development and innovation promotion.A partir du cas de l'industrie irlandaise des logiciels, l'article examine comment un secteur et une région ‘emprisonnés’ dans une relation de dépendance, via une production routinière inscrite dans un réseau mondial de fabrication de logiciels, ont réussi à monter dans la chaîne technologique et productive pour mettre au point des opérations plus sophistiquées au sein d'entreprises étrangères et irlandaises. Les rapports dans les réseaux de production tendent à s'institutionnaliser et à s'auto‐reproduire. Entreprises et territoires restent plutôt prisonniers d'une niche donnée, en l'absence de ‘projet de développement’ ou de coalition mobilisateur de ressources et de coopération, capable de les pousser dans une niche supérieure du réseau hiérarchisé. Cette poussée se crée seulement si un groupe marginalisé ou vulnérable situé dans le réseau ou à sa périphérie s'allie à des organismes publics d'aide. Même si les réseaux de production mondiaux institutionnalisent des liens hiérarchiques, des coalitions de développement peuvent encore se mobiliser autour de contacts et de ressources appartenant à ces réseaux pour pénétrer de nouvelles niches, plus élevées dans les hiérarchies. En pratique, cela exige une politique gouvernementale concertée et durable de développement industriel et de promotion de l'innovation.

“This is a Montreal Issue”: Negotiating responsibility in global production and investment networks

Recent advancements in the global production networks (GPNs) literature seek to better emphasize the role of finance by identifying where and how global financial networks (GFNs) intersect with GPNs. Financial centers (FCs) operate as key sites for articulating financial convergence, understood as the merging of financial and nonfinancial sectors enacted by cross-sectoral investments. Yet, how such entanglement both feeds on and impacts intercity networks, affecting metropolitan hierarchies, remains largely overlooked. Using a novel data set of 12,147 intersectoral, cross-border and domestic merger and acquisition deals involving finance and insurance firms throughout the period of 2000–20, this article unpacks the sectoral dynamics that underpin the intersection of GFNs with GPNs at the city level in India, the fifth largest economy in the world. Our longitudinal and multiscalar analysis demonstrates how uneven patterns of financial convergence, structured around the rising entanglement between finance and information technology (IT), have reshaped intercity networks and affected the landscape of FCs in India. If Mumbai remains India’s financial capital, Bangalore and New Delhi gained power in domestic and international flows, well ahead of other Indian cities. The article emphasizes how the IT firms, as recipients of transnational investments, and central governments, through direct interventions and state-hybrid investors, operate as key drivers in articulating GFNs with GPNs through intercity networks, changing urban geographies of finance, raising methodological and conceptual questions for future research on financial geography.

Abstract: Labour-intensive industries suffered a spectacular loss of their weight in the industrial structure of post-socialist Hungary having an intermediary position between the Western economies controlling the global industrial value chains and the Eastern low-cost production locations. This degradation process can be particularly witnessed in the case of the footwear industry which experienced two large waves of decline, one during the change of regime in 1989 and the other after the turn of the millennium. In the background of the changing performance of the footwear sector there were also significant structural changes during both periods of decline. Integration into global production networks by subcontracting or as subsidiaries of foreign enterprises, process and functional upgrading tendencies within the existing value chains as well as the establishment of Hungary’s own brand products for niche markets are the most important issues in this respect. This study is built upon two key questions: (1) What kind of dynamics does the Hungarian footwear industry show during its integration into the (global) production networks of the sector? (2) How are global production networks becoming embedded into the local economy; and to what extent can the transformation of the Hungarian footwear industry be considered as a path- and place-dependent process? The empirical research is based on semi-structured and in-depth interviews carried out in the last three years with representatives of enterprises from eleven industrial locations – comprising about 35 % of the total sectoral employment – in addition to sector-relevant national and local institutions.

Even though labour has been an important research topic in the field of economic geography for many years, up to now little has been known about transnational labour migration of highly skilled employees in global production networks. This article examines the role and the impact of highly skilled (re-)migrants of Turkish origin who studied and/or worked in Germany for several years in knowledge-intensive business services (KIBS) offshoring. To do so we analyse the empirical case of a German automotive company that operates as a lead firm within a global automotive production network. The company has insourced enterprise resource planning (ERP) software services from their suppliers in Germany and offshored those to a captive offshore service centre in Istanbul (Turkey). Based on our empirical material, we found that highly skilled (re-)migrants of Turkish origin are used as boundary spanners to efficiently and effectively manage the knowledge transfers from the onshore organizations to the service centre in Istanbul. Thereby, highly skilled (re-)migrants of Turkish origin help to mitigate resistance and facilitate the dis- and re-embedding of knowledge within the offshoring process. The exploration of highly skilled labour migration from a transnational perspective contributes to the discussion about the role of labour in global production networks.

Comment on “Philippine Infrastructure and Connectivity: Challenges and Reforms”

Production Globalization Makes China’s Exports Cleaner

Methodology for the strategy-oriented distribution of decision autonomy in global production networks

Prema-chandra Athukorala, Australian National University: This paper undertakes a comparative analysis of production networks in Europe and East Asia in the global context, with emphasis on determinants of export patterns and intra-regional linkages. The findings suggest that: exports of intermediate goods (used as a proxy for parts and components or “middle products” exchanged within production networks) are more sensitive to trade barriers than total goods exports; regionalization of production networks is primarily determined by greater sensitivity of intermediate goods trade cost associated with distance that overwhelms cost advantages arising from advances in transportation and communication technology; and the production network in these two regions are being guided by distinct factors with geographic distance and remoteness playing a more significant role in East Asia than in the EU. Overall, this is an interesting paper on an important subject. However, I would like to suggest that the authors pay attention to the following methodological imitations in their further research.Trade within global production networks (“network trade”) is based on “global production sharing”—breakup of the production process of a given product into vertically separated stages/tasks carried out in several countries. Therefore, network trade essentially has two components: trade in parts and components (involving the “middle layer” of the production process) and trade in final assembly (Jones and Kierzkowski 2001; Obashi and Kimura 2018). The empirical analysis of this paper uses “intermediate goods” (delineated using the UN Broad Economic Classification Broad Economic Categories [BEC] at the 3-digit level of commodity classification) rather than parts and components and completely ignore final assembly.BEC-based intermediate goods include both parts and components and the standard intermediate goods such as iron and steel, industrial chemicals, and metal products. These two categories of intermediate goods have different characteristics as traded goods. Unlike standard intermediate goods, which are normally traded based on market-determined prices, trade in parts and components are mostly characterized by “relationship specificity” among the user firms (Athukorala and Khan 2016). Therefore, the former is not a good proxy for latter. In addition, data relating to intermediate goods (based on the BEC classification) significantly overstate the magnitude of bilateral trade links within global production networks of resource-rich countries, such as Malaysia and Indonesia.According to my calculations, final assembly accounts for 53.2 percent of total world network exports in 2006–07 (two-year average) (Athukorala 2014). More importantly, this share varies notably among countries: For instance, final assembly bulks large in network exports from China because it is the world's finally assembly center, where as parts and components (mostly exported to China) account for much of networks exports from the other countries in the region. Given this fundamental structural feature of production sharing, ignoring final assembly significantly underestimate the relative importance of network trade in global manufacturing but also the underestimation bias varies significantly among countries, giving rise to a bid problem in econometric analyzing of trade patterns using multi-country data, as has been done in this paper.I believe that the finding of this paper relating to regional rather than global integration of East Asian production networks is a statistical artefact resulting from the omission of final assembly from the commodity coverage of network trade. China accounts for more than half of final assembly exports from the region and more than 70 percent of these exports are to markets in North America, Europe, and the rest of the world. If network trade is measured appropriately, capturing both parts and components and final assembly, you will find a China-centered global (rather than regional) production network in Asia. The other Asian countries export parts and components to China, and China exports final assembly largely to the rest of the world.The empirical analysis of the paper is a direct application of the gravity equation specified by Anderson and van Wincoop (2003) to analyze determinants of “total” trade flows. No attempt has been made here to modify it to suit analyzing trade flows within global production networks informed by the theory of global production sharing (Jones 2000; Jones and Kirzkowski 2001; and many other papers). The “missing prince from Hamlet” is the “lead firm” (multinational enterprise [MNE]). There is no variable in the model to capture the pivotal role of MNEs within production networks. The standard variable used for this purpose is foreign direct investment. The production location decision of the lead firm is determined by the “relative cost” (mostly relative wages) among countries and the “service link cost” associated with undertaking different tasks of the production process and smoothly linking/coordinating these tasks. There is no relative cost variable in the model. I think per capital gross national income is a reasonably good proxy, if data on manufacturing wages are not available. Inclusion of most of the other variables (distance, remoteness, colonial links, RTAs, common language) can be theoretically justified as capturing “service link cost.”

Strategic Planning of Global Changeable Production Networks

Global production networks are highly complex to manage and constantly to optimize. Recent developments such as political power changes, pandemic crises or increasing trade hurdles have significantly altered the risk exposure of global production set-ups. We use optimization and simulation tools to derive a suitable network type. We develop a global cross-shipping strategy with an integrated approach combining heuristics and simulation. We quantify the impacts of different uncertainties, such as plant closure and high demand variation with simulation, and it to compare to a local-to-local production network. Our approach makes the model easy to implement and close to real-world processes. This paper provides support for production network decision-making. We present a scientifically sound and practically feasible approach to an important actual business management problem. The developed integrated approach does not require assumptions about the production network structure or policies and is therefore applicable to a wide range of settings. In our case study, we quantify the positive impact of a global cross-shipping production network in comparison to a local-to-local approach. The result of our study helps to adjust the needed strategic and operational measures to manage a global production network.

This article explores what types of incentives drive buyers and suppliers in global production networks to raise the floor of labour standards and deliver better outcomes for workers. It does so by analysing the Better Work Programme, a policy intervention targeting the global apparel production network at the global, national and factory levels. Better Work is taken as an example of how global production networks and their dynamics, both trade-related and buyer-driven, can be harnessed to simultaneously achieve social and economic upgrading, presenting factory-level evidence from Cambodia, Haiti and Vietnam.

There is an implicit but commonly held assumption that Chinese businesses are distinctively Chinese. Casting them in unitary and national terms, this assumption has often provided the underpinnings for the conception of the strength of Chinese businesses as signs of an emerging China threat. Drawing on a global production networks (GPN) approach, this paper aims to question the assumption by arguing that many Chinese businesses, embedded in the expanding global and regional production networks, have taken on important transnational characteristics. Given these transnational connections, Chinese business networks in both ‘Greater China’ and China proper are characterized more by diversity and fragmentation than by cultural coherence and homogeneity. This analysis of the transnationalization and fragmentation of contemporary Chinese businesses helps better understand and respond to the complex challenge posed by the economic dynamism in China.

This paper examines the growth trajectory and the current state of the Indian automobile industry, paying attention to factors that underpinned its transition from import substitution to integration into global production networks. Market-conforming policies implemented by the government of India over the past 2 decades, which marked a clear departure from protectionist policies in the past, have been instrumental in transforming the Indian automobile industry in line with ongoing structural changes in the world automobile industry. India has emerged as a significant producer of compact cars within global automobile production networks. Compact cars exported from India have become competitive in the international market because of the economies of scale of producing for a large domestic market and product adaptation to suit domestic market conditions. Interestingly, there are no significant differences in prices of compact cars sold in domestic and foreign markets. This suggests that the hypothesis of “import protection as export promotion” does not hold for Indian automobile exports.

Methodology for the Assessment of Structural Complexity in Global Production Networks