Abstract
• Supplier firms in GVCs are increasingly adopting multichain strategies serving buyers across the global North and South. • We test whether multichain strategies have led to economic upgrading among Kenyan horticulture suppliers in 2006–18 period. • Our mixed-methods approach combines multilevel linear regressions, propensity score matching, system-GMM, and interviews. • Multichain strategies have led to economic upgrading through improved product diversification and higher economic returns. • We highlight the need for GVC research to account for the multichain strategies of suppliers serving multiple value chains. An extensive body of research has examined the prospects for suppliers in the global South to upgrade within global value chains (GVCs) controlled by lead firms from, and oriented towards end-markets in, the global North. However, the expansion of South-South trade has altered the geography of GVCs. Previous studies highlight key differences between North-South value chains (NVCs) and South-South value chains (SVCs). Much less is known about the multichain strategies used by suppliers who participate simultaneously in NVCs and SVCs, and how these affect their prospects for economic upgrading. This article draws on the case of Kenyan horticultural suppliers to explore the implications of multichain strategies for economic upgrading, in terms of value-added tasks (product diversification and product sophistication) and economic returns (unit values). We adopt a mixed-methods approach combining transaction-level customs data for the 2006–2018 period with supplier interviews. We find that suppliers adopting multichain strategies experienced significantly more product diversification and higher economic returns than suppliers operating only in NVCs or SVCs, yet results for product sophistication are insignificant. Our results are robust to the use of multilevel linear regressions (MLRs), propensity score matching (PSM), and two-step system-GMM. The article highlights a critical need for GVC research to account for the multichain strategies of suppliers serving multiple and overlapping value chains, and their implications for economic upgrading.
Highlights
Despite widespread consensus that participation in global value chains (GVCs) can foster economic development in the global South (World Bank, 2019), there is compelling evidence to suggest participation alone is not sufficient (Barrientos et al, 2011; Fagerberg et al, 2018)
This article provides an important contribution to existing GVC literature, which to date has largely focused on upgrading in single value chains – North-South value chains (NVCs) or South value chains (SVCs)
The multilevel linear regressions (MLRs), system-GMM, and propensity score matching (PSM) models combined with evidence from 11 supplier interviews suggest that multichain suppliers achieve more economic upgrading relative to single-chain suppliers
Summary
Despite widespread consensus that participation in global value chains (GVCs) can foster economic development in the global South (World Bank, 2019), there is compelling evidence to suggest participation alone is not sufficient (Barrientos et al, 2011; Fagerberg et al, 2018). Ing among their suppliers in the global South (Dolan & Humphrey, 2004; Maertens et al, 2012) They do so by governing the outsourcing of value-added tasks and the distribution of profits and risks through stringent and costly contractual arrangements, which significantly constrain suppliers’ opportunities to participate and upgrade in GVCs (Alford, 2020; Nadvi, 2008; Ouma, 2010). Total volumes of South-South trade have surpassed North-South trade, leading to an unprecedented expansion of South-South value chains (SVCs), where both lead firms and suppliers are located in the global South (UNCTAD, 2015; Mohanty et al, 2019) This implies that Southern suppliers have potentially increased opportunities to serve multiple buyers across the global North and South (Horner & Nadvi, 2018). Multichain suppliers devise different multichain strategies, ranging from decisions to vary product volumes sold across different markets, to shifting product types and standards in order to maximise earnings (Ponte & Ewert, 2009; Sako & Zylberberg, 2019)
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