Upgrading Of Firms Research Articles

Upgrading e riposizionamento delle imprese distrettuali nella catena internazionale del valore

The paper uses a unique dataset to address the issue of the functional and competitive upgrading of firms located in Italian industrial districts as a way to counter the growing competition faced by the suppliers of intermediate goods in global value chains (GVC). To maintain or enhance positioning in the global economy, firms use upgrading strategies to move from low-value to relatively high-value activities. An indepth empirical analysis of these upgrading patterns was conducted through a survey composed of questions designed ad hoc according to state-of-the-art GVC literature. In particular, the responses enable us to identify the various upgrading behaviours of firms located inside and outside districts, and how these strategies can boost the competitiveness of industrial districts to address the new challenges of globalisation.

Can small regions construct regional advantages? The case of four Norwegian regions

The conceptual framework of constructing regional advantage (CRA) is implicitly relevant for large, well-off regions that have strong regional innovation systems, a diversity of industrial sectors and resourceful firms that can partake in global knowledge networks. This paper discusses the extent to which small regions, with less developed regional innovation systems, may also constitute the basis for developing regional advantage. Four cases of regional industries dominated by different innovation modes make up the empirical test bed in the paper. The innovation modes are STI (science, technology, innovation), CCI (complex, combined innovation) and DUI (doing, using, interacting). With some reformulations, the CRA framework also is found to represent a useful conceptual construct for small regions. Adapting the CRA framework to small regions involves focusing more on increasing the innovation capabilities at the level of the firm – placing less emphasis on the endogenous capacity of regional innovation systems, but emphasising the importance of experience-based knowledge in local labour markets – and concentrating more on the need for a diversity of knowledge bases at the regional level. Policy lessons for constructing regional advantages in small regions should, in general, consider the upgrading of DUI firms and stimulating extra-regional links.

Economic and social upgrading in global production networks: A new paradigm for a changing world

Abstract.A key challenge in promoting decent work worldwide is how to improve the position of both firms and workers in value chains and global production networks driven by lead firms. This article develops a framework for analysing the linkages between the economic upgrading of firms and the social upgrading of workers. Drawing on studies which indicate that firm upgrading does not necessarily lead to improvements for workers, with a particular focus on the Moroccan garment industry, it outlines different trajectories and scenarios to provide a better understanding of the relationship between economic and social upgrading.

Global value chains, industry structure, and technology upgrading of local firms: the personal computer industry in Korea and Taiwan during the 1980s

This article argues that the modular value chains of the personal computer (PC) industry provide similar windows of opportunity to Korean and Taiwanese firms, however, the local firms have incorporated foreign technology and markets in different ways, and this has resulted in the development of distinctive innovation patterns in Korea and Taiwan. The structural coupling argument emphasizes the right strategies linking foreign technology with domestic conditions, given the governance structure of the industry. The paper compares the processes of different strategic coupling in the Korean and Taiwanese PC industries during the 1980s, individual but overlapping technology licences of big Korean firms versus joint licences by the public research institutes in Taiwan, original equipment manufacturing (OEM) as the momentum for the vertical integration within firms in Korea versus those for the expansion of subcontracting network in Taiwan, and overseas R&D investment on an individual firm basis in Korea versus co-funding and joint ventures in Taiwan. The Korean and Taiwanese cases have implications for other developing countries. The chances of successful technology upgrading are high when domestic assets such as industry structure, government policy and human resources are properly combined with the strategic needs of global lead firms in the industry. It is important for firms and governments in developing countries to find suitable ways of strategic coupling based on a good understanding of the global governance structure of the industry, as well as their domestic advantages.

Knowledge Transfer from TNCs and Upgrading of Domestic Firms: The Polish Automotive Sector

This paper focuses on the impact of vertical knowledge transfer from foreign affiliates of Transnational Corporations (TNCs) to indigenous Polish suppliers. Firm-level data was collected through a survey among foreign affiliates and domestic suppliers in the Polish automotive sector. The study finds that foreign firms contribute to the knowledge base of local firms, and that the knowledge domestic suppliers receive enables them to enhance their performance, but also that it is R&D intensity that is critical for suppliers’ new knowledge creation. Inter-firm relationships are shown to play a significant role in the process of knowledge transfer and acquisition between foreign firms and domestic suppliers

Economic integration and the dynamics of firms’ competitive behavior

We investigate the evolution of firms’ competitive behavior in the EU by studying the dynamics of firms’ price-cost margins (PCMs) across four countries (France, Italy, Poland and Sweden), in three manufacturing and three services industries for around 170,000 firms over the period 1999–2007. By looking at density distributions of the PCM across firms, we detect an aggregation problem affecting country specific measures of PCM levels, with PCM changes providing instead an unbiased representation of industry dynamics. A Laspeyres-type decomposition of PCM changes shows pro-competitive effects over the period, induced mainly by the reallocation channel, and a tendency to a quality upgrading of firms, revealed by the positive interaction term. These trends are stronger after 2002. We also observe a trend towards lower PCMs across manufacturing industries, while the latter is not true for services. These findings are confirmed by a dynamic panel econometric exercise performed on the pooled firm-level sample.

Indigenous and Foreign Innovation Efforts and Drivers of Technological Upgrading: Evidence from China

This paper explores the role of indigenous and foreign innovation efforts in technological upgrading in developing countries, taking into account sectoral specificities in technical change. Using a Chinese firm-level panel dataset covering 2001–05, the paper decomposes productivity growth into technical change and efficiency improvement and examines the impact of indigenous and foreign innovation efforts on these changes. Indigenous firms are found to be the leading force on the technological frontier in the low- and medium-technology industries, while foreign-invested firms enjoy a clear lead in the high-technology sector. Collective indigenous R&D activities at the industry level are found to be the major driver of technology upgrading of indigenous firms that push out the technology frontier. While foreign investment appears to contribute to static industry capabilities, R&D activities of foreign-invested firms have exerted a significant negative effect on the technical change of local firms over the sample period.

Global Value Chains, Technology Transfer and Local Firm Upgrading in Non-OECD Countries

The productivity and competitiveness of local firms in non‐OECD countries depends as much on technological capacities and successful upgrading as in industrialized countries. However, developing countries undertake very little to no original R&D and primarily depend on foreign technology. Long‐term contracts and subcontracting arrangements wi‐ thin global value chains are here very important forms of transnational cooperation and therefore also important channels for technology transfer, especially as the majority of these countries attract only limited foreign direct investment. Drawing on innovation and growth models as much as on value‐chain literature, we out‐ line an analytical model for empirical research on local firm upgrading in non‐OECD countries and technology transfer within global value chains.

Toward a More Embedded Production System? Automotive Supply Networks and Localized Capabilities in Poland

ABSTRACTThe article addresses the embeddedness of automotive production in Poland in terms of supply networks. A comprehensive analysis of more than 550 suppliers, supported by company interviews, shows that foreign‐owned producers become embedded in Poland in the automotive supplier networks they have largely created themselves. Numerous local suppliers gain access to export markets and become integrated in a Europe‐wide production system. This trend has been accompanied by significant upgrading of foreign affiliates and domestic firms in terms of product quality, cost efficiency, adaptability, and fast response, but far less in nonproduction competences such as R&D. It is argued that the competences of automotive suppliers in Poland are built upon the localized capabilities, which are a product of the dynamic interplay between the activity of foreign firms and the changing local environment comprising various stakeholders. The localized capabilities constitute elements of a company's sunk costs and are embedding automotive producers in Poland. At the same time, the dependence on decisions and innovations from abroad and the limited development of local design and brands may constrain the future role of suppliers from the semiperipheral economy of Poland.

UK retail concentration, Chilean wine producers and value chains

This paper seeks to examine how value chains impinge upon firms within the Chilean wine sector. The value chain analysis will further link the production and export of wine in Chile with the import and retailing of this wine in one key core economy market, namely that of the UK. The analysis is divided into three sections. First, the political economy of value chains in agro‐industry is discussed, particularly in relation to the distinction between network or quasi‐hierarchical relationships. Then the paper examines the theme of retail concentration in the UK and the impacts that this has on global value chains which incorporate Chilean wine firms. The focus then moves to value chains and the nature of upgrading within Chilean wine firms by examining the strategic example of the lead firm and firm upgrading as a response to demands of UK retailers and through the flying winemaker model. Broad conclusions on the comparative nature of value chains and the scramble for value within them are finally made.

MNEs vertical linkages: The experience of Vietnam after Malaysia

Knowledge transfer from multinational corporations to local suppliers in host developing countries have been shown to be substantial and a strong contributor to the competitive upgrading of firms in host economies. Using data provided by multinational subsidiaries, this paper compares the activities of multinationals in both Malaysia and Vietnam. Malaysia is considered because its experience with foreign direct investment is long standing (compared to Vietnam) and useful recommendations can be drawn for Vietnam, allowing for the transition nature of the Vietnamese economy. The objectives of the paper are two-fold: to demonstrate the potential for knowledge transfer between multinationals and their suppliers in both Malaysia and Vietnam; and to build upon this discussion to suggest avenues for Vietnam to maximise beneficial linkages from MNEs.

GLOBALISATION, FIRM UPGRADING AND IMPACTS ON LABOUR

ABSTRACTThe question that drives this paper is: When can we expect firm upgrading by developing‐country suppliers in global value chains will lead to improvements in labour conditions? To deal with this question we, (a) position firm upgrading in the global value chain approach, (b) investigate existing evidence and conceptualisations on how economic globalisation impacts on labour, and (c) develop some hypotheses on when we can expect firm upgrading and improvements in labour conditions to go together. We conclude that firm upgrading in developing‐country suppliers in global value chains as a rule does not lead to improvements in labour conditions. Instead, the much broader and more forceful process of immiserising growth makes it very unlikely that workers in such relatively low‐skilled production activities will enjoy improvements in labour conditions. Ethical sourcing may lead to improvements in labour conditions of core workers in final product manufacturers and key supplier firms, but it is as yet unclear to what extent such a business model can and will be disseminated. More generally, even though economic globalisation does selectively create new jobs, even labour conditions of core workers may be under pressure while the overall proportion of core workers appears to be declining.

Foreign Direct Investment: A Catalyst for Local Firm Development?

Foreign direct investment (FDI) is recognised as a mechanism by which a host country can upgrade the competitiveness of its resources and capabilities. In the extant literature, empirical assessment of the impact of FDI on development has tended to focus on the aggregate effects associated with capital, employment and technology transfer, without a corresponding emphasis on the longer-term impacts on firm upgrading. In this article, we investigate the effects of inward FDI at the level of the firm, within the context of a small, developed country. Statistical analysis highlights key relationships between resource flows from parent to affiliate, and a) competitive advantage of the affiliate, and b) resource transfer to local firms via linkages. The findings provide evidence that local firm development occurs as a result of direct resource transfer, both within the multinational enterprise and between the affiliate and host country firms. Les investissements directs etrangers (IDE) sont reconnus comme etant...

The Globalization of Product Markets and Immiserizing Growth: Lessons From the South African Furniture Industry

The central issue addressed in this paper is whether some developing countries will find it difficult to compete effectively in global product markets and will therefore be locked into processes of immiserizing growth. It focuses on the role of South African producers in the global furniture value chain, analyzing the factors affecting firm upgrading, particularly the role of global buyers. The paper observes a global industry characterized by increased competition and falling unit prices, with local firms dependent on a falling exchange rate. It concludes with implications for policy and future research, including generalizing the findings to other sectors and countries.

How to Promote Clusters: Policy Experiences from Latin America

In this paper we propose to differentiate between three types of clusters when it comes to formulating cluster-oriented policies in Latin America. Survival clusters of micro- and small-scale enterprises owe their existence more to unfavorable macroeconomic conditions and less to entrepreneurial competence and dynamism. Their competitive potential is limited. Support measures should mainly aim at improving the conditions for survival since these clusters are important in creating employment opportunities. The impetus should be to break through the low skills/low investment vicious circle. More advanced and differentiated mass producers have been flourishing in the import-substitution era but are coming under enormous pressure with the transition to open economies. In these clusters the main challenge is to create an environment that stimulates and supports learning, innovation, and constant upgrading. Clusters of transnational corporations are typically dominated by foreign firms not only at the final assembly stage but also in parts production. These clusters often are showcases of best-practice manufacturing; this can be used to stimulate the upgrading of domestic firms, notably by involving them in the supply-chain of transnationals.

The shift to knowledge-intensive production in the plastics-processing industry and its implications for infrastructure development: three case studies— New York State, England and Israel

During the 1980's, the plastic-processing industry in developed countries has had to shift to knowledge-intensive production in order to remain competitive. To accomplish this, the industry was forced to reorganize in order to ensure the existence of a technological infrastructure that would permit such production to take place. In this paper a comparative study was made of this shift in New York State (U.S.), England and Israel. The main findings are: (1) most processors are small firms that cannot provide all technological services, such as research and marketing, in-house; consequently, they depend on external services. (2) The formation of adequete services may be inhibited by failure of market forces, compelling firms to cooperate to assure their development. (3) Cooperation is feasible only if firms understand that, in the new production approach, industrial activity takes place in a network composed of processors, research and development centers, materials suppliers, trade companies, and end-users. (4) In New York State, such awareness developed during the 1980s and contributed to the expansion of technological infrastructure and the upgrading of firms. (5) In England, technological services developed partly with government assistance, but most processors, lacking awareness of the developments, made few restructuring efforts. The only exceptions were those serving sophisticated end-users, such as the defense and automative industries. (6) Israeli industry failed to create adequate services until 1991. However, many kibbutz factories, with their highly educated labor force, successfully developed their own services, even though this often caused wasteful redundancy of efforts. The principal conclusion is that policies meant to stimulate restructurng should focus above all on creating awareness of developments in the industry and ensuring an educated labor force. Moreover, inter-firm cooperation should be stimulated to ensure development of technological services and industrial networking.

As the millennium turns for science and technology

During the 1980's, the plastic-processing industry in developed countries has had to shift to knowledge-intensive production in order to remain competitive. To accomplish this, the industry was forced to reorganize in order to ensure the existence of a technological infrastructure that would permit such production to take place. In this paper a comparative study was made of this shift in New York State (U.S.), England and Israel. The main findings are: (1) most processors are small firms that cannot provide all technological services, such as research and marketing, in-house; consequently, they depend on external services. (2) The formation of adequete services may be inhibited by failure of market forces, compelling firms to cooperate to assure their development. (3) Cooperation is feasible only if firms understand that, in the new production approach, industrial activity takes place in a network composed of processors, research and development centers, materials suppliers, trade companies, and end-users. (4) In New York State, such awareness developed during the 1980s and contributed to the expansion of technological infrastructure and the upgrading of firms. (5) In England, technological services developed partly with government assistance, but most processors, lacking awareness of the developments, made few restructuring efforts. The only exceptions were those serving sophisticated end-users, such as the defense and automative industries. (6) Israeli industry failed to create adequate services until 1991. However, many kibbutz factories, with their highly educated labor force, successfully developed their own services, even though this often caused wasteful redundancy of efforts.The principal conclusion is that policies meant to stimulate restructurng should focus above all on creating awareness of developments in the industry and ensuring an educated labor force. Moreover, inter-firm cooperation should be stimulated to ensure development of technological services and industrial networking.