Global Value Chains: How to Enhance Resilience under Sudden Shocks?

Abstract

The vulnerability of global value chains (GVCs) to sudden shocks generated by the COVID-19 pandemic carries risks of destabilization of national economies. Limited studies on this issue give space to debatable assessments (also in Russia) of the expediency of countries’ participation in GVCs. Since various aspects of such participation have already been widely considered in the Russian literature, we focus on another aspect of the topic — possible strategies of international business (leading MNEs) for enhancing GVC resilience under high uncertainty. The initial section provides background definitions related to the GVC concept, including the treatment of resilience (as the ability of systems to respond flexibly to shocks and adapt to a changed environment through internal restructuring). Then we formulate advantages of the modern distributed model of production and trade in value-added through GVCs, as well as display a typical design of a manufacturing GVC and its global supplier network. Further, we consider stages in the GVCs’ expansion and describe the distributed model vulnerabilities before and during the COVID-19 crisis. On this basis, we systematize strategies of leading MNEs, outlined in 2020, for enhancingGVC resilience in the post-crisis period, with highlighting two directions in MNEs’ activities — 1) restructuring and diversification of supplier networks and 2) optimization of production control through applying digital technologies. We then reveal possible impact of these strategies on GVCs’ regionalization (their transition from a globally distributed to macroregional format), and point to potential shifts in the global production landscape. Final section outlines a new phase of globalization titled reglobalization. We conclude that reconfiguration of GVCs allows developing economies, including Russia, to improve their position in the global production, provided they are ready to implement necessary structural reforms.