Interdependence of value chain links: A tale of three cities

Abstract

Most of the products in the world are produced and delivered by value chains which are the sum name of value adding activities performed in a sequence by different firms working in different countries. And in most of the cases value chain actors belong to both developed and developing world and adding different amount of value to value chain for producing and distributing products. Some value chains are driven by buyers and other work under the leadership of producers. Those who hold the intangibles gain more than those who hold tangibles in a value chain because intangibles .e.g. brands, designs etc provide more sustainable competitive advantage and are more difficult to imitate than tangibles .e.g. machines, buildings etc. The role of developing country firms is maximum original equipment manufacturer and minimum job processors but the role of original brand and design manufacturer is mostly performed by developed country firms. Members working in developing countries are mostly SMEs and exist in clusters. Most of SME clusters in developing countries are linked with global value chain and in some cases with global value chains. These SME clusters are spontaneous and have emerged without any policy support but for upgrading they do need policy support at all levels. SME clusters in developing countries consist of sub-clusters and may involve more than one cities forming different links of value chain. Different studies show that SME clusters in developing countries are confronting different issues .e.g. lack of sufficient energy sources, lack of training centers, poor quality of inputs etc. On one hand these issues are restricting them to be innovative and on the other hand reducing their competitiveness. To transform from static and dynamic clusters to innovative clusters they obviously need some solid demand driven policy measures at every level.