The Role of Global Value Chains for German Manufacturing

Abstract

Since the 1960s, Germany has established itself as European manufacturing centre, and its export of goods made in Germany has become a pillar of its economic post-war success. In recent years, many German firms have further deepened their international involvements with links to global value chains. Lower costs of doing business internationally and increasing possibilities to source material and service inputs in multiple countries have triggered new forms of organizational adjustments. Such novel types of adjustment faced by firms have, in turn, further pushed the issue of global value chains to the forefront of the policy and academic debate, and have often been surrounded by public fear about job losses and foreign competition.This paper investigates the role of global value chains in the organization of Germany´s manufacturing activities and its recent economic developments. In particular it asks: how important are global value chains for German manufacturing firms? Why do firms use global value chains? What are the implications for Germany of the use of global value chains? The paper measures the extent of Germany’s link into global value chains, discusses the causes and consequences of such, and concludes with a brief outlook on the likely future of such international production chains.