GVC Analysis: A Tool to Promote Economic Development

By Gary Gereffi and Karina Fernandez-Stark

The global economy is increasingly structured around global value chains (GVCs). The evolution of GVCs has significant implications for global trade, production and employment and how developing country firms, producers and workers integrate into the global economy. This is particularly the case in sectors such as commodities, apparel, electronics, tourism and business service outsourcing.

GVCs link firms, workers and consumers around the world and often provide a stepping-stone for firms and workers in developing countries to participate into the global economy. For many countries, especially low-income countries, the ability to effectively insert themselves into GVCs is a vital condition for development. This supposes an ability to access GVCs, to compete successfully and to “capture the gains” in terms of national economic development, capacity-building and generating more and better jobs to reduce unemployment and poverty. Thus, it is not only a matter of whether to participate in the global economy, but how to do so gainfully.

The GVC framework allows one to understand how global industries are organized by examining the structure and dynamics of different actors involved in a given industry. In the very complex industry interactions of today’s globalized economy, the GVC methodology is a useful tool to trace the shifting patterns of global production, link geographically dispersed activities and actors within a single industry, and determine the roles they play in developed and developing countries alike. The GVC framework focuses on the sequences of value added activities within an industry, from conception to production, end use and beyond. It examines the job descriptions, technologies, standards, regulations, products, processes, and markets in specific industries and places, thus providing a holistic view of global industries both from the top down and the bottom up.

The comprehensive nature of the GVC framework allows policymakers to answer questions regarding development issues that have not been addressed by previous paradigms. Additionally, it provides a means to explain the changed global-local dynamics that have emerged within the past 20 years. As policy makers and researchers alike have come to understand the pros and cons of the spread of globalization, the framework has gained importance in tackling new industry realities. This includes topics such as the role of emerging economies like China, India and Brazil as new drivers of global value chains, the importance of international product and process certifications as preconditions of competitive success for export-oriented economies, the rise of demand-driven workforce development initiatives as integral to dynamic economic upgrading, and the proliferation of private regulations and standards, while also proving useful in the examination of social and environmental development concerns.

A range of institutions and governments have commissioned GVC studies over the years to provide understanding of global industries. This new knowledge has then served as a guide in the creation of new programs and policies that have successfully promoted economic development.

This is an excerpt based on Part I of the publication “Global Value Chain Analysis: A Primer”. Access the entire publication at the following link. Professor Gary Gereffi is the Director of the Duke University Center on Globalization, Governance & Competitiveness and one of the co-creators of the Global Value Chain Framework. Karina Fernandez-Stark is a Duke CGGC Senior Research Analyst. Duke CGGC addresses economic and social development issues for governments, foundations and international organizations. Contact Mike Hensen if you would be interested in discussing how Duke CGGC’s contract research, advising and training services can benefit you.