Industrial Upgrading and Downgrading of Export-Oriented Furniture Firms in the Market Reorientation Towards China’s Domestic Market

Abstract

In the face of shrinking demands from Western advanced markets after the 2008 global financial crisis, export-oriented supplier firms in China have engaged in the transition from exporting products to Western customers to selling in China’s domestic market. However, the effects of the market reorientation, especially the subsequent industrial upgrading trajectories have been understudied. Drawing upon the perspective of global production networks (GPNs), this chapter attempts to explore the industrial upgrading trajectories of export-oriented firms in their market reorientation from exports to domestic sales. Taking the export-oriented furniture industry in the Pearl River Delta (PRD), China as the case, this chapter argues that integration into domestic market-oriented production networks has stimulated industrial upgrading, as well as downgrading of furniture firms. Some competitive furniture firms achieved functional upgrading when they established brands for the strategic coupling with domestic chain retailers, while some showed passive attempts at industrial upgrading or even experienced downgrading. The empirical study demonstrates the mix value capture trajectories combining industrial upgrading and downgrading of export-oriented industries in the process of market reorientation. It could enrich the literature by incorporating market dynamics into the studies of industrial upgrading or downgrading. It aims to explore the implication of the rise of emerging markets (e.g. China) for the industrial upgrading of export-oriented industries in developing countries in the post-crisis global economy.