Global Production Networks
- 1. Global Production NetworksBy Matt Coty
- 2. A Review of “Whither Global Production Networks in Economic Geography”By Hess, Martin and Yeung, HenryA Review of “Global Production Networks and the Changing Geography of Innovation Systems. Implications for Developing Countries” By Ernst, Dieter
- 3. OverviewStructures in which to study global production systemsNational to international innovation systemsMobility and diffusion of knowledgeImplications for developing countriesConclusions
- 4. Structures in which to study Global Production SystemsHow to study global production networks?How to explain spatially uneven development in capitalist economies?
- 5. Structures in which to study Global Production Systems
- 6. National to international innovation systemsNational Innovation Systems – the institutional determinants of learning, knowledge creation, and innovationAssumptions:Innovation is essential for growth and welfareWant to gain as a nation
- 7. National to international innovation systemsNational vs. International linkagesNational:Nation contains a unique economic structureDetermines its specializationDetermines its path of innovationDetermines its linkages (both national and international)
- 8. National to international innovation systemsNational vs. International linkagesInternational linkages of the host economySuppliers to multi-national firmsLicensed partners
- 9. National to international innovation systemsNational vs. International linkagesProblem is that developing countries often lack linkages in their own countrySo international linkages fill in the gapsR&DProductionSupply
- 10. Mobility and diffusion of knowledgeIs innovation Immobile?
- 11. Mobility and diffusion of knowledgeKnowledge and innovation tend to move slower than production or financial flowsTacit knowledge – slowImplicit knowledge – fastDesire to keep information to sustain competitive advantagesSynergy created from geographic clustering
- 12. Mobility and diffusion of knowledgeHow then does knowledge and innovation move?Unlike production, knowledge moves and concentrates in specific clusters (semi conductor industry)Standardized production and implicit knowledgeHigh end production and tacit knowledge
- 13. Mobility and diffusion of knowledge
- 14. Mobility and diffusion of knowledge
- 15. Mobility and diffusion of knowledgeAdvantages of location are important in determining knowledge flowsProduct Life CycleShort – suppliers and assemblers need to locate near one anotherImplication: advantages of clustering – (spillovers, efficiency…)Long – no need for co locationImplication: more even geographic dispersion (take advantage of cheap labor etc…)
- 16. Mobility and diffusion of knowledgeExtension of these advantagesThrough time the knowledge flows through the GPNLow end producers gain knowledge and produce higher end products while outsourcing the lower end products (thus further extending the chain and moving up it themselves) Solectron This is one way developing countries increase knowledge
- 17. Mobility and diffusion of knowledgeDisadvantages of location are important in determining knowledge flows (when the chain grows spatially)General:Delivery and distribution CommunicationDemand fluctuationInternational: PoliticalManagerialInferior processesExchange rate fluctuations
- 18. Mobility and diffusion of knowledgeDiffuseClusterStandardized production
- 19. Take advantage of cost savings
- 20. Knowledge diffusion - slow
- 22. Take advantage of knowledge spillovers
- 23. Knowledge diffusion - quickMobility and diffusion of knowledgeHow to deal with these problems:Standardized processes can be located far awayHi end production close (cluster advantages)Production location near high growth markets
- 24. Implications for developing countriesIntegration of developing countries into global production networksHelp the country– diffusion of knowledgeHurt the country – erode competitive advantages
- 25. Implications for developing countriesKnowledge Diffusion into a Developing CountryParent CompanyKnowledge Flow
- 26. Implications for developing countriesKnowledge Diffusion into a Developing CountryParent CompanyKnowledge Flow
- 27. Implications for developing countriesIndustrial upgrading – shifting to higher value added products and production stages through increasing specialization.-Ernst 2001Assumptions:KnowledgeInnovation
- 28. Implications for developing countriesSpecializationInter-industryInter-factorialDemand upgradeFunctions upgradeIdentify links between innovationLinkagesspecializationsSustained Growth
- 30. Implications for developing countriesPolicy Roles for Government concerning integration of GPN’sGlobalization makes governments enact policiesInvestment policiesTrade policiesTargeted industrial development to take advantage of specializations and competitive advantagesNot to do so would be detrimentalvulnerability to MNC’sinternational financial fluctuations
- 31. Implications for developing countriesInteresting Theory: Intellectual property rightsShould developing countries encourage the diffusion of intellectual property? (i.e. weak property rights?) Then gradually increase protection as knowledge increases?
- 32. ConclusionsGlobal Production Networks and Developing CountriesAbsorption of foreign ideas and knowledgeReduce risk through diversificationIncrease in knowledge leads to increase in innovation which leads to sustained growth