Servicification of Manufacturing in Global Value Chains: Upgrading of Local Suppliers of Embedded Services in the South African Market for Wind Turbines

Abstract

While services are an essential element in the global production, trade and consumption of manufactured goods, limited research has been conducted on the role of services in studies of global value chains (GVCs). Recently, however, an emerging literature on the ‘servicification’ of manufacturing in GVCs has evolved, most of which involves aggregate-level analyses of countries and sectors based on trade statistics. Previous studies have thus failed to explore whether and how local firms in developing countries may capture value and upgrade through their insertion into GVCs as service suppliers. In this paper, we contribute to the literature by analysing the development of an industry supplying wind-turbine services in South Africa. We draw on in-depth fieldwork, including fifty-two interviews and five case studies of firms operating as suppliers of various types of ‘embedded’ services to wind-power projects constructed in South Africa. We show the significant economic value in terms of the employment thereby created and the upgrading pathways of five local service-suppliers in knowledge-intensive and high value-added service activities. Our findings point to the benefit of devoting attention to the role of services in relation to upgrading in GVCs.