Global Value Chains strongEconomicstrong and Policy Issues.pdf

Global Value Chains: Economic and Policy Issues Global Value Chains: Economic And Policy Issues Steven Globerman* Western Washington University and Simon Fraser University 1. Introduction “Companies no longer compete – Value Chains Compete” (Murphy, 2007, p.11) In the past few years, a fairly substantial literature has emerged addressing the phenomenon of global value chains (GVCs). While one can find various definitions of GVCs, the simple concept proposed by Lunati (2007) seems to capture the spirit of most definitions. Namely, GVCs are international supply chains characterized by fragmentation of production activities across sites and borders. In effect, the whole process of production, from acquiring raw materials to producing and delivering a finished product, has increasingly been “sliced”, so that each activity that adds value to the production process can be carried out wherever the necessary skills and materials are available at competitive cost (OECD, 2007; Feenstra, 1998). A related explanation of the GVC phenomenon is provided by Borga and Zeile (2004) who characterize the GVC phenomenon as the increasing divisibility of production activities. That is, production activities can be increasingly divided into different stages that can be performed in different locations. The GVC phenomenon has, in turn, been linked to the concept of international outsourcing (“offshore outsourcing”), although they are conceptually distinct. In