From Commodity Chains to Value Chains
and Back Again?
Jennifer Bair
Yale University
Department of Sociology
PO Box 208265
New Haven, CT 06520
This is a draft of a work in progress. Comments and
criticisms are welcome and appreciated.
The author wishes to thank
Richard Appelbaum, Gary Gereffi, Philip McMichael, Andrew Schrank, and Ben
Brewer for their comments on an earlier version of this paper.
Abstract
This paper assesses the
achievements and limitations of the commodity chains framework as it has
evolved over the last near-decade, and concludes by suggesting directions for
future research. First, I examine the evolution of the chain approach by
briefly discussing the differences between the two camps that employ the
commodity chain concept: the world-systems school (whose proponents coined the
phrase) and the global commodity chain (GCC) camp that has developed around the
work of Gary Gereffi and colleagues. Second, I highlight the contributions that
the GCC literature has made in the areas of methodology, theory, and policy.
Third, I discuss a recent change in nomenclature that has occurred within the
GCC camp, as some scholars have argued that the more inclusive language of
value chains should replace the more specific concept of commodity chain. In
this section, I evaluate the concept of industrial upgrading, which figures
prominently in the value chains literature and conclude that while the
upgrading problematic is particularly relevant and useful for policy
discussions, its micro-orientation focuses our attention narrowly on the firm
level, and thus fails to inform a more sociological and comprehensive analysis
of the social processes and spatial dynamics of uneven development in the
global economy. In the fourth section, I briefly identify fruitful directions
for commodity chains research that might address some of the weaknesses
inherent in the value chain literature. Specifically I argue that GCC research
should focus on the regulatory, institutional, and systemic factors that shape
commodity chains and condition the development outcomes associated with them.
In laying out this agenda, I draw on a number of recent contributions which
suggest that a second generation of commodity chain research can already be
discerned.
Arguably, a general consensus has characterized the
field of development studies for more than two decades. The failure of
state-led industrialization models in much of the former Third World and the debt
crisis of the 1980s, as well as the success of East Asia’s export-oriented
economies, has been interpreted as evidence that integration into the global
economy is the only option for developing countries to pursue.[1] While recent criticisms of the neoliberal
paradigm have argued that the state still has a role to play in facilitating
development (Amsden 2001; Rodrik 2002), even critics of the market-radical
versions of the prevailing orthodoxy nevertheless appear to take as
self-evident the proposition that the goal for developing countries is
increased competitiveness in world markets. In this context, it is not
surprising that the global commodity chains (GCC) framework has inspired and
oriented a spate of recent scholarship attempting to incorporate analyses of
globalization into development studies.
While many observers have noted the “impasse” or
“disarray” plaguing development studies since the neoliberal turn across much
of the former Third World (Manzo 1991; Portes 1997; Robinson 2002), the GCC approach
has been regarded as something of an exception to this general malaise. British
sociologist Jeffrey Henderson contends that the GCC framework “foregrounds in
news ways the dialectic of possibility and constraint associated with
industrialization in the developing world and industrial transformation
elsewhere. In so doing it has the capacity to show empirically the nature of
the benefits and limitations on economic and social development that derive
from the particular forms which global economic linkage takes” (1996: 405; also
Raikes et al 2000).[2] Furthermore,
the steady increase in contributions to the GCC literature in recent years is
evidence of the framework’s value for researchers interested in the
organizational dynamics and developmental outcomes of global industries.
This paper assesses the achievements and limitations of the commodity
chains framework as it has evolved over the last near-decade, and concludes by
suggesting directions for future research. First, I examine the evolution of
the chain approach by briefly discussing the differences between the two camps
that employ the commodity chain concept: the world-systems school (whose
proponents coined the phrase) and the global commodity chain (GCC) camp that
has developed around the work of Gary Gereffi and colleagues. Second, I
highlight the contributions that the GCC literature has made in the areas of
methodology, theory, and policy. Third, I discuss a change in nomenclature that
has occurred within the GCC camp, as some scholars have argued that the more
inclusive language of value chains should replace the more specific concept of
commodity chain. I argue that the recent elaboration of a global value chain
theory suggests a further distancing between the earlier commodity chain literature
and its more recent value chain variant. Because the concept of industrial
upgrading figures prominently in the value chains literature, I offer a
critical assessment of the upgrading construct in this section, concluding that
it focuses attention too narrowly on the firm level to inform a more
sociological and comprehensive analysis of contemporary development processes.
In the fourth and final section, I briefly outline fruitful directions for
commodity chains research that can address some of the weaknesses inherent in
the value chain literature. Specifically I argue that research should focus on
the regulatory, institutional, and systemic factors that shape commodity chains
and condition the development outcomes associated with them. In laying out this
agenda, I draw on a number of recent contributions which suggest that a second
generation of commodity chain research can already be discerned.
I. From commodity chains to GCCs
The term commodity chain appears in the opening pages
of Wallerstein’s Historical Capitalism,
in which the author summarizes the distinctiveness of capitalism as a
historical social system characterized by the “widespread commodification of
processes—not merely exchange processes, but production processes, distribution
processes and investment processes—that had previously been conducted other
than via a ‘market’” (1983: 15). Wallerstein goes on to use the term commodity
chain to describe the complex ways in which production processes are “linked to
one another” (16). In a 1986 article by Wallerstein and Terrence Hopkins
analyzing trade and capital flows in the global economy prior to 1800, a commodity chain is defined with greater
precision as a “a network of labor and production processes whose end result is
a finished commodity” (159). The term also appears in an article by Giovanni
Arrighi and Jessica Drangel in the same 1986 issue of Review. In their discussion of the core-periphery distinction in
the world-economy, Arrighi and Drangel note that this dichotomy “is meant to
designate the unequal distributions of rewards among the various activities
that constitute the single overarching division of labor defining and bounding
the world economy. All these activities are assumed to be integrated in
commodity chains” (16).
In 1994, an edited volume by Gary Gereffi and Miguel
Korzeniewicz launched a framework for the study of what they called global
commodity chains (GCCs). The chapters appearing in Commodity Chains and Global Capitalism (including one by Hopkins
and Wallerstein) had been given as papers at the 16th annual
conference on the Political Economy of the World-System, which took place at
Duke University in April, 1992. Although the intellectual lineage of the GCC
concept can thus be traced clearly to its roots in the world-systems
literature, it is important to note the disjuncture between the tradition of
commodity chain research deriving from Wallerstein’s formulation and what has
been developed by Gary Gereffi and colleagues as the GCC paradigm. Below I
briefly discuss two examples of this disjuncture, focusing on differences in
opinion between the two camps regarding the nature of globalization and the
objective of commodity chain analysis.
Research on commodity chains from a world-systems
perspective has focused on the historical reconstruction of the shipping and
wheat flour industries during the long sixteenth century, whereas scholars
identifying with the GCC approach have taken a sectoral approach to analyzing
the inter-organizational dynamics of global industries in today’s international
economy. The difference in temporal orientation, between the historical
approach of the world-systems camp on the one hand and the more contemporary
flavor of GCC research on the other, reflects a disagreement between the two
schools regarding the novelty and salience of “globalization.” World-systems
scholars contend that “transstate, geographically extensive, commodity chains
are not a recent phenomenon, dating
from say the 1970s or even 1945,…they have been an integral part…of the functioning
of the capitalist world-economy since it came into existence in the long
sixteenth century” (Wallerstein 2000: 2). In contrast, the latter group views
global commodity chains as an emergent organizational form associated with a
more recent and qualitatively novel process of economic integration: “One of
the central contentions of the GCC approach is that the internationalization of
production is becoming increasingly integrated in globalized coordination
systems that can be characterized as producer-driven and buyer-driven commodity
chains” (Gereffi 1996: 429).[3]
For Gereffi and colleagues, the ascendancy of
globalization demands new methods for studying a country’s prospects for
mobility in the international economy. They argue that the state-centered
approaches that have traditionally dominated the study of development fail to
recognize the increasingly significant ways a country’s economic performance is
affected by participation in integrated internationalized production systems:
“Our GCC framework allows us to pose questions about contemporary development
issues that are not easily handled by previous paradigms, and permits us to
more adequately forge the macro-micro links between processes that are
generally assumed to be discreetly contained within global, national, and local
units of analysis” (Gereffi, Korzeniewicz, and Korzeniewicz 1994: 2). The
principal task of GCC analysis is to explicate the organizational dynamics of
global industries in order to understand where, how, and by whom value is
created and distributed (Appelbaum and Gereffi 1994). Special attention is paid
to the most powerful or “lead firms” in a sector, which are also known as
“chain drivers,” because of their presumed importance as potential agents of
upgrading and development: “One of the major hypotheses of the global commodity
chains approach is that development requires linking up with the most
significant lead firms in the industry” (Gereffi 2001: 1622).
GCC researchers claim that this approach allows one to
look at how a country’s developmental prospects are shaped by its participation
in international production networks understood as global commodity chains. Its
substantive interest in, and analytical emphasis on, national development
represents a further break between the GCC framework and the world-systems
tradition, as one of the latter’s main contentions is that national development
is a meaningless concept in a stratified global capitalist economy premised on
the exploitation of the periphery and semi-periphery by the wealthy countries
of the system’s core (Arrighi and Drangel 1986; Wallerstein 1974, 1994). While
one may observe minimal mobility between these levels, as individual countries
move up or down, what is relevant from the perspective of world-systems theory
is the reproduction of this hierarchically structured global capitalist
economy.
As Wallerstein has explained because “there is no such
thing as ‘national development’…the proper entity of comparison” or unit of
analysis is the world-system (Wallerstein 1974), not the individual countries
that make up the collective whole, and surely less the networks of particular
firms that are the primary object of GCC inquiry. Thus, world-systems researchers are interested in the entirety of
commodity chains, not their constituent parts. Whereas much of the GCC
literature to date is devoted to describing the characteristics of different
links of the chain, as well as the relations between them, the world-systems
camp contends that it “is the characteristics of the chain as a whole that
should be the primary object of investigation, not those of particular boxes,
or particular aspects of all boxes” (Wallerstein 2000: 12).
These differences manifest distinct research agendas.
World-systems scholars consider the commodity chain “a vital research location”
for the study of the capitalist world economy (Wallerstein 2000: 199). For them, the chain construct is useful
insofar as it illuminates the dynamics of capital accumulation at a particular
point in the evolution of the world-system, and thus one of the major
objectives of world-systems research on commodity chains is to develop ways of
calculating the total surplus value of a chain and tracing the distribution of
that surplus between the various links (or boxes, in Wallerstein’s terminology)
that comprise it.[4] Identifying
different rates of return across the boxes of a particular chain can shed light
on the “pattern of complex and shifting investments among different sectors of
the economy…, and why being in the industrial sector was not and is not always
the most interesting place to be in terms of capital accumulation” (ibid:
7).
Although most reviews of the GCC literature locate its
intellectual origins in the world-systems orientation (Dicken et al. 2001; Smith
et al. 2002; Phyne and Mansilla 2003) or identify its roots in “radical
development theory” (Whitley 1996: 404) or “the dependency tradition of
analysis” (Henderson et al. 2002), the GCC camp has moved research on commodity
chains away from the type of long-range historical and macro-level analysis
typical of the world-systems school. Rather, the GCC framework has evolved as a
network-based, organizational approach to studying the sectoral dynamics of
global industries (Raikes et al. 2000).[5]
One of the main strengths of the GCC framework is that
the clear research agenda that proceeds from it has engendered a coherent body
of empirical research on global industries. Since the mid-1990s, an
international community of scholars has studied a wide variety of commodity
chains that range across Asia, Africa, and Latin America, as well as North
America and Europe. Among the industries included in this research are tourism,
apparel and textiles, footwear, automobiles, electronics, plastics, and a
variety of agricultural commodities including fruits, vegetables, coffee and
cocoa.[6] While this article will not attempt a
comprehensive review of the existing literature oriented by the GCC framework,
the next section offers reflections on this past near-decade of research.
II.
What have we learned from research on global commodity chains?
In the ten years since the
publication of Gereffi and Korzeniewicz’s edited volume, Commodity Chains
and Global Capitalism, a substantial body of work on GCCs has accumulated.
It is already possible to identify three significant contributions of this
literature in the areas of methodology, theory, and policy-making. First, the
development and application of the global commodity chains framework is a methodological
advance because it provides a way to map and analyze the spatially dispersed
and organizationally complex production networks that are an important part of
economic globalization. It departs from much of the research in the
world-systems tradition, in this regard, as the macro-orientation of the latter
tends to efface difference within macro-regions, let alone the increasing
diversity that exists within national economies, as export-oriented policies
promote uneven development trajectories that reinforce existing inequalities within,
as well as across, countries. Insofar as GCC research analyzes the activities
of particular firms, and especially the chain drivers that play the pivotal
role in organizing international production networks, it gives greater weight
than a more orthodox world-systems approach would to the role of firms as
agents in the global economy.
Second, research on GCCs has contributed at the theoretical
level to our understanding of the inter-organizational dynamics of
contemporary capitalism and, in particular, how power is exercised in global
industries. Further elaboration of this point calls for a brief review of the
GCC framework. Gereffi identifies four dimensions with respect to which every
commodity chain can be analyzed: 1) an input-output structure (the process of
transforming raw materials into final products), 2) a territoriality (or
geographical scope), 3) a governance structure, and 4) institutional context.[7]
As has been noted (Raikes et al. 2000; Henderson et al. 2002), studies of
existing GCCs have focused primarily on the governance dimension—that is, the
question of which firms in the chain are most able to control various aspects
of the production process and how they appropriate and/or distribute the value
that is created.
The concept of governance as it is understood in the
GCC framework, and as it has been examined in numerous case studies of
particular commodity chains, recognizes what much of the literature on flexible
specialization or post-fordism has documented—namely, that in the contemporary
international economy, dynamics of power and control are not necessarily
correlated with traditional patterns of ownership. The empirical insights
afforded by research on the governance dimension of GCCs have helped flush out
the meaning of the interfirm network as an organizational form that is neither
market nor hierarchy (though it may exhibit characteristics of each).
Perhaps the best known distinction in the GCC
literature is the one Gereffi draws between producer-driven (PDCC) and
buyer-driven commodity chains (BDCC). The former are characteristic of more
capital-intensive industries (e.g. motor vehicles) in which powerful
manufacturers control and often own several tiers of vertically-organized
suppliers, as opposed to light manufacturing industries (apparel being the
classic case), where far-flung subcontracting networks are managed by
designers, retailers, and other brand-name firms that market, but do not
necessarily make, the products that are sold under their label (Gereffi 2001).
While the applicability and utility of the PDCC/BDCC
distinction has been disputed (Clancy 1998, Gellert 2003, Henderson et al.
2002), what is most significant about the dichotomy between these ideal types
is the theorization of commercial capital (what are often called “big buyers”
in the GCC literature) as the power brokers that call the shots for the many
firms involved in the buyer-driven commodity chains they control, although they
may have little relation to the actual production of goods made on their behalf.[8]
While the apparel industry is the best documented case of a buyer-driven
commodity chain (Gereffi 1999), a similar governance structure has been
identified in the commodity chain for some agricultural products, in this
latter case reflecting the increasing power of supermarkets as the relevant big
buyer (Dolan and Humphrey 2000). The
implications of this finding are particularly salient since the widespread
disavowal of import-substituting industrialization strategies in the global
South in favor of export-oriented initiatives that frequently encourage
specialization in the kind of labour-intensive, light manufacturing industries
characterized by buyer-driven commodity chains.
Third, I want to briefly highlight the policy
implications of GCC research. As will be discussed in greater detail in the
next section, recent work from the so-called value chains perspective, which is
related to the GCC framework, has focused on finding ways to leverage the
insights afforded by the latter into effective policy interventions that can
enable local firms to improve their positions in particular value chains—a
process the value chain literature identifies as upgrading: “Understanding
how…value chains operate is very important for developing-country firms and
policy-makers because the way chains are structured has implications for
newcomers. How can economic actors gain access to the skills, competencies and
supporting services required to participate in global value chains? What
potential is there for firms, industries, and societies from the developing
world to ‘upgrade’ by actively changing the way they are linked to global value
chains?” (Gereffi et al. 2001: 2). Local and national governments, as well as
international institutions such as the International Labour Organization, have
expressed interest in the answers to these questions, viewing the GCC framework
as a paradigm that can usefully orient and inform policy (Henderson et al.
2002; Gereffi 2004, forthcoming).
There is another way in which GCC research is being
applied in the strategies of a very different constituency—NGOs, such as
anti-sweatshop groups that promote “clean clothes” campaigns and organizations
supporting other forms of consumer “activism” such as fair trade coffee
(Gereffi, Garcia-Johnson and Sasser, 2001).[9] Since the mid-1990s, following several
well-publicized cases of labor abuses in U.S., Latin American, and Asian
garment factories producing for well-known brand-names such as The Gap, student
and consumer groups across North America and Europe have focused on the problem
of how to promote labor rights, safe working conditions, and a living wage in
global industries dominated by powerful and footloose big buyers on the one
hand, and characterized by a workforce that is powerless and largely invisible
to the consumer on the other. One significant thrust of this effort has been to
create accountability in global industries by identifying the relationships
between lead firms and their suppliers and subcontractors around the world, and
demanding that the former enforce codes of conduct designed to insure that
their products are made in a sweat-free environment. This methodology requires
tracing the interfirm networks that a GCC orientation allows one to identify
and such “real world” applications of the commodity chains concept are among
the most fruitful implications of this research to date.
Despite these achievements, in the remainder of this
paper, I argue that important work on commodity chains remains to be done. In
the next section, I describe the emerging “global value chains” literature and
assess its relationship to the global commodity chain construct. In so doing, I
hope to highlight the limitations of this paradigm, and in particular the
emphasis that the value chains literature places on firm-level upgrading.
II. From GCCs to value chains?
As is well known, over the course of the 1980s and 1990s an ever
growing number of countries in the developing world shifted from
import-substituting industrialization strategies to an export-oriented model,
which has been promoted by the international financial institutions and the
U.S. Treasury Department as one element in a package of reforms consisting of
trade liberalization, macroeconomic stabilization, privatization of state-owned
enterprises, and financial market deregulation. Not surprisingly, in this
context paradigms that shed light on the workings of international trade and
production networks have been in high demand. Because the global commodity
chain framework seemed particularly well-suited to inform policy debates about
the best way for developing countries to access, and benefit from their
participation in, foreign markets,[10]
it was featured prominently in an International Labour Office research program
on globalization and employment in the mid-1990s and has influenced the
“cluster strategy” being promoted by the United Nations Economic Commission for
Latin America and the Caribbean. These initiatives, as well as the general
proliferation in recent years of studies on GCCs and how developing-country
producers become incorporated into them, attests to the framework’s perceived
potential for contributing to the study of globalization.
The GCC paradigm is not alone in this regard, however.
In fact, the global commodity chains framework is one of several network- or
chain-based approaches to the study of economic globalization popular today.
Other constructs that have oriented research programs include international
production networks (Borrus, Ernst and Haggard 2000), global production networks,
(Ernst 1999; Henderson et al. 2002), global production systems (Milberg 2003),
and the French filière concept (Jessop 2000; Raikes et al. 2001). Given this
variety of approaches, some have argued that it would be useful to agree upon a
common terminology of “value chain analysis” as a way of promoting a research
community comprised of scholars studying production networks in the global
economy. In fact, such a community already exists in the form of a “global
value chain” research network (see www.globalvaluechain.org).
The GCC framework has been identified as one of
several network methodologies included within the overarching value chain
rubric. In a recent review of the value chain literature that endorses the new
terminology, Gereffi et al. explain that “the value-chain concept was adopted
over several widely-used alternatives because it was perceived as being the
most inclusive of the full range of possible chain activities and end
products,” although the authors note that “each of the contending concepts…has
particular emphases that are important to recognize for a chain analysis of the
global economy” (Gereffi et al. 2001).[11]
The special issue of the journal IDS Bulletin
in which the common value-chain terminology is proposed documents the
contributions of value chains research in recent years. This July 2001 issue,
entitled “The Value of Value Chains: Spreading the Gains from Globalization,”
represents the first attempt to review and compare the findings of different
studies on value chains, as part of a larger effort to “develop common
parameters for defining different types of value chains and a taxonomy of value
chains that can be operationalised through a robust set of indicators” (Gereffi
et al 2001: 3). Synthesizing existing research on value chains allows one to
identify similarities in the structure and governance of chains across
industries. For example, value chains researchers have noted the rise of a
particular type of subcontracting network whereby highly competent suppliers
assume responsibility for a full range of activities beyond “basic” production
(such as design and inventory/logistics management). Although the terminology
varies between industries (from turn-key supply in the electronics industry to
full-package supply in the apparel industry), a common value chain orientation
makes it possible to identify a similar organizational form across sectors
(Sturgeon 2001). Thus, as the editors of the special issue on value chains make
clear, establishing a shared language among researchers on global industries
allows one to recognize analogous developments across distinct sectors that may
be obscured by nominal differences in terminology.
However, should one interpret the shift in language
from “commodity chain” to “value chain” as more than a matter of mere
nomenclature? A recent paper by Gary Gereffi, John Humphrey, and Timothy
Sturgeon (2004), in which the authors attempt to develop a theory of value
chain governance, suggest that this is the case. In this article, the authors
develop a typology of five types of governance structures that describe the
network relationships linking suppliers in global industries to lead firms.
This typology is based on the possible combinations resulting from variations
(measured as “low” or “high”) in three independent variables: the complexity of
transactions, the codifiability of information, and the capability of
suppliers. The value chain theory of governance suggests that the relationships
between lead firms and suppliers differ across sectors, due to the particular
characteristics of the production process and the organization of the industry,
such as the sophistication and availability of the technology involved, the
existence or absence of (technical and process) standards, and the extent to
which rapid turnaround time or speed to market is essential to competitiveness.[12]
The goal is to explain variation across sectors in terms of how global
production is organized and managed, focusing on the key role of transaction
costs, including so-called “mundane” transaction costs that arise from
coordinating activities along the chain
(Baldwin and Clark 2000).[13]
Although the earlier discussion of the value chain
framework referred to above (in the 2001 special issue of IDS Bulletin) specifically noted the close relationship between the
global commodity chain and value chain concepts, Gereffi, Humphrey, and
Sturgeon describe the intellectual influences shaping their project differently
in this more recent contribution: “For us, the starting point for understanding
the changing nature of international trade and industrial organization is
contained in the notion of a value-added chain, as developed by international
business scholars who have focused on the strategies of both firms and
countries in the global economy.” Indeed the only reference to the global
commodity chains literature that appears in the 2004 paper notes that, while
the GCC framework “drew attention to the role of networks in driving the co-evolution
of cross-border industrial organization,” it “did not adequately specify the
variety of network forms that more recent field research has uncovered.”[14]
Gereffi, Humphrey, and Sturgeon attempt to address this weakness by developing
a theory of value chain governance that not only acknowledges this variation,
but attempts to explain it by
identifying its key determinants. In so doing they provide an agenda for
further value chain research, which will include developing ways to
operationalize and measure the key independent variables, and eventually
formulating and testing hypotheses derived from the theory of value chain
governance.
However, one can also identify an important continuity
between the earlier and later elaborations of the value chains framework—an
interest in firm-level industrial upgrading. Specifically, the central question
of interest for value chain researchers is how firms can improve their position
within these chains so as to generate and retain more value. In order to
achieve this objective, firms need to understand where they fit into the value
chains in which they participate. It is here that the insights generated by GCC
research on governance are most useful for value chain analysis, and most
specifically, as Gereffi argues in his contribution to the IDS Bulletin on
value chains, the role of lead firms: “The emergence of new forms of
value-chain governance is driven by the evolution of organisational
capabilities by leading firms in the global economy…In order for countries to
succeed in today’s international economy, they need to position themselves
strategically within…global networks and develop strategies for gaining access
to the lead firms in order to improve their position” (2001b: 32).[15]
Similarly, in their 2004 RIPE
article, Gereffi, Humphrey and Sturgeon express their hope that “the theory of
global value chain governance that we develop here will be useful for the
crafting of effective policy tools related to industrial upgrading, economic
development, employment creation, and poverty alleviation.”
At the most basic level, the value chains literature
defines upgrading as improving a firm’s position within the chain, and this is
generally associated with securing more of the value-added through the
production process. But how is this objective achieved, and how are upgrading
efforts evaluated? One possible avenue for upgrading that value chains research
has identified is for a firm to move up the same value chain from a more
marginal to more secure position by increasing the range of functions
performed. For example, a turn-key or full-package manufacturer is often
responsible for additional functions beyond basic production, such as design or
logistics management; this is called intra-chain or functional upgrading.
Additional types of upgrading include product upgrading (producing more
sophisticated goods with higher unit prices) and process upgrading (improving
technology and/or production systems). Inter-chain upgrading (moving from one
industry to another) is a fourth type of upgrading that has been identified
(Gereffi et al 2001; Humphrey and Schmitz 2000).
As studies of various value chains suggest, firms
attempting to upgrade via one of these paths often have considerable difficulty
in doing so. In large part, this is due to the increasing barriers to entry
that exist as one moves along the chain. Central to the power of lead firms,
and particularly those that control buyer-driven chains, are activities related
to marketing, design, and brand development. Value chain research tells us that
firms can upgrade by capturing more of the value created in these links, while
also underscoring the significant, and some would argue increasing, obstacles
that they face: “As ‘intangible’ aspects of production (i.e. marketing, brand development,
design) become increasingly important for the profitability and power of lead
firms, ‘tangibles’ [production and manufacturing] have become increasingly
commodified, leading to new divisions of labor and new hurdles for
developing-country producers to overcome if they wish to enter these chains. It
is almost certainly a pervasive trend…that the barriers to entry in intangibles
are growing faster than those in tangible activities” (Gereffi et al. 2001).
Chains research of both the GCC and value chain variety have documented the
efforts of firms in various industries to upgrade through one or more of these
strategies, documenting their successes as well as their failures (Talbot 1997;
Bair and Gereffi 2001; Fitter and Kaplinsky 2001). The result of these efforts
is a significant contribution to our understanding of the relationship between
chain governance and firm-level upgrading prospects, which is, in turn,
“critical to the debate on whether there is a spreading of the gains from
globalization (Humphrey and Schmitz 2001: 21).
The contribution of value chains research to the
debate about globalization’s winners and losers should be obvious from the
discussion above. However, there are two distinct, though related limitations
with the extant formulation of upgrading that the value chains literature
offers. First, value chain
research focuses on upgrading primarily at the level of the individual
firm in the context of a particular value chain. As noted earlier, when
analyzed in comparative perspective, this approach yields evidence of similar
organizational forms characterizing global production networks across different
industries (such as the rise of turn-key contract manufacturing in the apparel,
auto, and electronics industries, as well as some agro-commodities such as
cocoa and coffee). As one value chain scholar has noted, recognizing these
similarities requires one to look closely at the micro level in order to
identify “the specific bundles of activities that firms are engaged in”
(Sturgeon 2001: 15).
However, this firm-level orientation poses a unit of
analysis dilemma. How does one translate the process of upgrading at the level
of the firm into its implications for the larger units that are traditionally
regarded as the spaces or containers of development, such as the local,
national, or regional economy? Put differently, how do we aggregate up and out
from the firm level? While Gereffi has argued that a country’s development
prospects are conditioned by how they are incorporated into global industries
(1995), how does the nature of a firm’s
insertion into a particular commodity chain map on to a country’s incorporation into the global economy?[16]
The problem is particularly vexing since, just as virtually every nation is
linked to the global economy via more than one export role (Gereffi and Wyman
1990), so too are many firms connected to commodity chains via more than one
type of linkage (i.e. as a subcontractor for some clients, a full-package
supplier for others, and as a producer of own-brand products for the domestic
market).
Second, we need to be more careful in specifying who the process of upgrading benefits.
For example, what is identified as functional or intra-chain upgrading often
describes situations in which suppliers take on additional responsibilities
(such as design, logistics management, or distruibution) at the behest of the
lead firm. While these suppliers in the commodity chain thereby “add value”
from the vantage point of the chain driver, another way to interpret this process
is the off-loading of less profitable activities onto more vulnerable firms.[17]
The ability of a supplier to add greater value to the lead firm may increase
its competitiveness vis-à-vis its rivals (until they develop analogous
capabilities), but a number of studies suggest that firms which “succeed” in
intra-chain or process upgrading do not necessarily reap the rewards, including
increased security and profitability, with which upgrading is ostensibly
associated (Bair 2002; Fitter and Kaplinsky 2001; Gibbon 2001; Schrank 2002;
Schurman 2001).
Research on the changing position of firms within
value chains further suggests that upgrading is often a process of exclusion,
particularly in developing countries whose integration into the global economy
is recent (Gibbon 2001; Dolan and Humphrey 2000). A comparative study of Kenyan
horticulture and Indian textile value chains lead Dolan and Tewari to conclude
that, although a number of local firms in each sector had been able to upgrade
successfully, changes in both value chains associated with process upgrading on
the part of the largest firms severely circumscribes the future upgrading
prospects of smaller producers and poses the “danger of excluding a large
swathe of low-performing domestic firms from the circles where new skills and
learning are being generated” (2001: 101).
Finally, more careful specification of who benefits from the process of upgrading requires closer attention to the role of workers as chain participants. As we know from a vast and growing literature, firms that successfully participate in global value chains may not deliver benefits to workers in the form of higher wages, greater job security, or improved working conditions (Bair 2002; Ponte 2002; Talbot 1997; Wood 2001). Paying more serious attention to labor than it has been given to date is necessary to fulfill what the proponents of value-chain analysis suggest is one of its primary objectives: to map the distributional incomes resulting from participation in international production networks (Fitter and Kaplinsky 2001). However, beyond looking at the extent to which workers benefit from processes of upgrading in terms of how value is distributed along the chain, discussions of upgrading also need to examine how workers contribute to the creation of value in terms of the labor process (Smith et al. 2002; cf. Bair and Ramsay 2001).
While the upgrading
construct is attractive as a heuristic for talking about mobility along the
value chain, it is too narrow a concept to answer the range of questions the
value chain perspective claims to address regarding “the winners and losers in
the globalisation process, how and why the gains from globalisation are spread,
and how the numbers of gainers can be increased” (Gereffi et al. 2001: 2). The
framework’s proponents recognize “the numerous downsides to globalisation,
including falling prices for producers and cases where upgrading of products or
processes does not necessarily lead to increased profits and sustainable
incomes” (ibid), but in order to understand these downsides we need to expand
the scope of inquiry beyond the level of the firm, the value chain, or even the
sector. In the fourth and final section of this paper, I outline several ways
in which commodity chains research might be advanced through a discussion of
existing literature that suggests a second generation of GCC research is
already evolving.
IV. Beyond value chains:
A research agenda for the second generation of GCC research
The next generation of GCC research should focus on
complementing the paradigm’s existing strength as a framework that allows us to
conceptualize and study global capitalism as it is manifest in particular
inter-firm networks that link economic actors across space. As noted above, the
most significant theoretical progress claimed by the first generation of GCC
research is a much better understanding of the governance structure of
commodity chains in terms of the power exercised by lead firms, and the
implications of a chain’s governance structure for the upgrading prospects of
actors in the chain. While the sectoral logics and interorganizational dynamics
of these networks across different industries are increasingly clear, what we
need to study more closely are the factors external
to chains that shape their geography and configuration, and may strongly
affect the extent to which different actors benefit from participation in them.[18]
There are three sets of such factors that I will briefly discuss below:
regulatory, institutional, and systemic.
Regulatory factors, particularly trade policy, shape the geography and configuration of
many commodity chains in the global economy. The regulatory context in which
international production networks are established and operate is an important
element affecting the extent to which developing country exporters in
particular benefit from their participation in commodity chains. For example,
while Gereffi, Humphrey and Sturgeon emphasize the modular governance structure
of the fresh vegetable value chain in explaining the relationship between
African exporters and British importers (2004: 12-13), Chris Stevens argues
that “the past success of…African horticultural producers may not be only the
consequences of having met the demanding technical standards of the UK
supermarkets that are the dominant force in the buyer-driven value
chain…Meeting technical requirements may be a necessary but not sufficient
condition. Trade analysis suggests that past European Union (EU) trade policy
has effectively excluded many of the most important global suppliers from the
UK market” (2001: 46). Stevens’ analysis of the EU market for agricultural
products shows that trade policy rents in this sector influence the value
chains linking suppliers to European markets, and concludes that this is likely
to remain the case in the future, despite the halting trend towards
liberalization under the WTO and the reforms of the EU’s Common Agricultural
Policy.
Stefano Ponte’s study of the coffee chain similarly
underscores the importance of regulatory factors, in this case the existence
and then demise of the international coffee agreements (ICA) which governed
trade in this commodity and which influenced the distribution of profits along
the coffee chain. Ponte documents how changes in the ICA regime have negatively
affected developing country exporters: “From a balanced contest between
producing and consuming countries within the politics of international coffee
agreements, power relations shifted to the advantage of transnational
corporations. A relatively stable institutional environment where proportions
of generated income were fairly distributed between producing and consuming
countries turned into one that is more informal, unstable, and unequal” (2002:
1099; also Talbot 1997).
Jennifer Bair and Gary Gereffi’s research on the North
American apparel commodity chain suggests how changes in regulatory context can
reshape global commodity chains. They have shown that the dramatic increase in
apparel exports from Mexico after 1994 reflected the response of leading U.S.
textile and clothing companies to the new trade regime of the North American
Free Trade Agreement (NAFTA) (Gereffi 1997; Gereffi and Bair 1998).[19]
Lead firms controlling the apparel commodity chain reconfigured their
international sourcing and production networks to take advantage of NAFTA’s new
rules of origin affecting trade in textile products in North America. The
initial post-NAFTA boom in apparel exports from Mexico and, to a lesser extent,
the expansion of local textile production signaled the rise of “full-package
production” in Mexico, as U.S. buyers sought to decrease their dependence on
Asian manufacturers in favor of near-by producers south of the border whose
fabrics and garments receive preferential access to the U.S. market (Bair and
Gereffi 2002).[20]
Bair and Gereffi’s research on the North American
textile-apparel complex further underscore the importance of institutional
context as a factor affecting rather (or which) firms and workers benefit
from their participation in commodity chains. Having identified the emergence
of full-package networks as a post-NAFTA organizational form linking Mexican
exporters and U.S. buyers, Bair and Gereffi analyzed data from fieldwork
conducted in Mexico in order to see if the process of industrial upgrading at
the firm level that they identified (as implied by the shift from the maquila
to full-package model) generated positive development outcomes in the various
production centers that are home to Mexico’s garment exporters (Bair 2001; Bair
and Gereffi 2001). As the most recent addition to this body of work has
emphasized, the spatial unevenness of Mexico’s export boom, and the devastating
implications of the U.S. economic downturn for Mexican exporters, underscore
the precariousness and contingency of the positive developmental outcomes this
export dynamism generated (Bair and Gereffi 2003).
In the apparel industry, as well as in Mexico’s other
leading export industries, the institutional environment of Mexico’s
contemporary political economy is of great relevance when evaluating the extent
to which capital and labor have benefited from their participation in
post-NAFTA commodity chains. Nancy Plankey Videla’s case study of a large
Mexican apparel firm yields complementary findings, which demonstrate the various
factors that constrain the upgrading efforts of developing country firms. The
company that is the subject of her study, “Moctezuma,” successfully upgraded in
the sense that it adopted “organizational, technological, and product
innovations with the objective of capturing higher value-added activities”
(2003: 1).[21] However,
Plankey Videla concludes that the firm’s inability to translate this process
into a foundation for sustainable competitiveness capable of generating
benefits for the firm’s owners and workers has as much to do with the pressures
characteristic of Mexico’s contemporary business environment (and particularly
a banking system that fails to make adequate amounts if affordable credit
available to domestic firms)as with the organizational dynamics of the
particular commodity chains in which this firm was participating.[22]
The importance of the institutional and
political-economic context in which global commodity chains “touch down”
locally is hardly confined to the Mexican apparel industry. In their study of
the Chilean salmon farming industry, Phyne and Mansilla demonstrate that the
relationship between the different links in this commodity chain, and in
particular the organization of work in Chile’s salmon farms, reflect in large
measure the “historically-derived social relations in the Chilean countryside”
(2003: 113). Phyne and Mansilla’s analysis highlights the importance of Chile’s
class structure and local power relations in explaining both the organization
of the export-oriented aquaculture industry and the extent to which domestic
capital and labor have benefited from the expansion of salmon farming in
particular communities. One of the lessons to draw from their studies is that
“[e]conomic actors…are always embedded in dense social and institutional
networks of relations (including labour relations and state regulations) at
both national and local levels, and these relations impinge in important ways
upon the variability of economic development outcomes across space” (Smith et
al. 2002).
In a very different geographic and industrial case,
Paul Gellert’s analysis
of Indonesia’s participation in the timber commodity chain, which emphasizes
the importance of politics in shaping
commodity chains, makes a similar point. Gellert shows how an oligopoly of
timber-producing firms that forged an alliance with the state created an
industrial association that effectively “upgraded” Indonesian firms along the
chain from exporting timber to manufacturing plywood. The key figure in
Gellert’s story is a politically well-connected industrialist, Mohammad “Bob”
Hassan, who transformed his “long personal and working relationship with
President Suharto” into an effective institutional promotion of the Indonesian
industry and an alliance with a Japanese trading company. Gellert argues that
the ability of Indonesia to become a major exporter in the global (particularly
Japanese) timber market reflects the “personal power of Hasan through his
patron-client relations with President Suharto” (2003: 67).[23]
While most GCC research has focused on developing
countries in Asia, Latin America, and to a lesser extent Africa, the economies
of Eastern Europe and the post-Soviet space may provide particularly fertile
empirical ground for understanding how institutional contexts shape commodity
chains. Obviously, as a result of massive restructuring and reform in the
“transition economies” over the course of the 1990s, firms in the
post-socialist space have become incorporated into commodity chains in new
ways. Global commodity chain analysis can help shed light on this process of
incorporation and its possible consequences, but GCC research needs to be
attentive to the particular ways in which “new” organizational forms are shaped
by pre-existing institutional configurations (Stark 1992; Czaban and Henderson
1998; Sadler and Swain 1994). If commodity chains are understood as
“situationally specific and socially constructed” (Gereffi, Korzeniewicz and
Korzeniewicz 1994: 2), then how is the embeddedness of these networks in the
larger institutional environment demonstrated? To what extent do commodity
chains as a whole as well as their constituent parts exhibit features of path
dependency?
Finally, insofar as the GCC framework is understood as
a methodology for studying the dynamics and consequences of a capitalist world
economy, research in this vein will do well to devote more attention on the systemic
properties of contemporary capitalism. Can we explain similarities in the
development of different commodity chains across industries in terms of
systemic processes? For example, can we articulate the increasing salience of
buyer-driven commodity chains with an analysis of structural transformation in
the global economy?
As the literature on globalization has proliferated in
recent years, many commentators have offered their interpretations of what has
emerged as the cultural and economic form following the crisis of U.S. hegemony
in the late 1970s, be it “the network society,” a postmodern capitalism
characterized by “time-space compression,” or “empire” (Castells 2000; Harvey
1989; Hardt and Negri 2000). One set of analyses has focused on the
“financialization” of global capitalism under U.S. auspices as the key to
understanding the numerous phenomenon associated with the contemporary period:
deindustrialization in the core economies, the East Asian “miracle” on the one
hand and Latin America’s “lost decade” on the other, and the rise of the
Washington Consensus, which codified the set of policy prescriptions
facilitating the shift from the development project to the globalization
project (Arrighi 1994, Arrighi and Silver 1999, McMichael 2000). Arrighi,
Silver and Brewer (2003) offer this argument in explaining why the rapid and
widespread diffusion of manufacturing in the Third World over the last twenty
years has resulted in industrial convergence between the global North and South
(as measured by manufacturing as a percentage of GDP) without a corresponding
process of convergence in the income gap separating the former from the latter.
Their analysis raises important insights that should challenge scholars of
commodity or value chains to theorize the spatial and temporal limits of
“industrial upgrading” in a contemporary global economy characterized by excess
capacity in manufacturing.
Arrighi, Silver and Brewer favor a Schumpeterian
analysis in explaining why much of the developing world, despite rapid
industrialization, has failed to narrow the North-South gap. Schumpeter’s
theory of creative destruction contends that “major profit-oriented innovations
are the fundamental impulse that generates and sustains competitive pressures
in a capitalist economy” (2003: 16). Schumpeter emphasizes the temporal cycle
of this process, identifying periods of “industrial revolution and the
absorption of its effects” as the alternating phases of “long waves in economic
activity” (1976: 67), but Arrighi, Silver, and Brewer suggest that while
Schumpeter argues that “profit-oriented innovations…cluster in time,” one might also explore their spatial clustering in order to
understand how the North-South divide is reproduced under global capitalism.
Profit-oriented innovation tends to originate in the wealthier countries of the
developed world, and as Vernon (1966; 1971) recognized, when new technologies
and processes mature and diffuse to the poorer countries, “they tend to be
subject to intense competition and no longer bring the high returns they did in
the wealthier countries” (Arrighi. Silver and Brewer 2003: 18).
For Schumpeter, the process of creative destruction
was the essence of capitalism’s evolutionary character, as “a form or method of
economic change” that “not only over never is but never can be stationary”
(1976: 82). Competition between firms to innovate characterizes all global
commodity chains, but as Arrighi, Silver, and Brewer emphasize the process of
creative destruction has a spatial element whereby successful innovation does
not occur randomly, but is much more likely to cluster in the wealthier
countries of the global North. One fruitful direction for GCC research would be
to apply the chain concept to explain how dynamics of power and profitability
in global industries differentially shape the returns to firms participating in
commodity chains, particularly those from developing countries.
In this recent article, Arrighi points to the same
research question suggested in his 1986 article with Jessica Drangel: can one
explain the stratification of the world-economy through the construct of global
commodity chains? In this earlier article, the authors hypothesize that a
country’s position in the world-economy reflects the mix of “core” and
“peripheral” activities it (or presumably its firms) perform in the various
commodity chains in which it is involved. Arrighi and Drangel are interested in
ascertaining the extent to which the stratified structure of the world-economy
has changed over time, and rather this suggests a process of “catch-up” between
the semi-periphery and the countries of the advanced, capitalist core. It is
not clear from their analysis how the profile of activities being performed at
the country (or firm) level aggregate up to the national economy’s position in
the world-system, nor do they explore in detail the question of what
constitutes core versus peripheral activities. However their discussion
suggests that the degree of competition characterizing a node in the chain
determines an activity’s status as either core or peripheral. Widespread
industrialization in the semi-periphery and even much of the periphery means
that the links in the commodity chain having to do with the actual production
or manufacturing process are characterized by increasing competition, leading
to the observed outcome that “the industrialization of the semiperiphery and
periphery has ultimately been a channel, not of subversion, but of reproduction
of the hierarchy of the world-economy” (56).
A commodity chains approach can contribute to this
line of inquiry by allowing us to study how patterns of inequality between the
global North and South are reproduced, in part, by the organization of
international production networks and the relationships between firms located
at different points in global commodity chains. Existing research on the
competitive dynamics of chains, such as the various types of rents generated
through the process of upgrading, which serve as barriers to entry for
potential competitors (Schmitz and Knorringa 1999; Kaplinsky 2000), can inform
this research agenda. In fact, asking how commodity chains reproduce and
reinforce inequality in the global economy can be read as the obverse but
apposite question of the one that orients current value chain research: how can
developing countries leverage participation in these chains to benefit various
constituencies, including firms, workers, and communities. Regardless of which
way we ask the question, I have tried to argue in this paper that the second
generation of commodity chains research should expand the scope of analysis to
include the various factors external to the chain—including the regulatory,
institutional, and systemic contexts in which they operate—affecting the
organization of these chains as well as the developmental outcomes associated
with them. While this next generation of research should build on the
impressive achievements of the first, the value of the GCC approach can be
strengthened by paying greater attention to these factors, and how they mediate
the implications of participation in commodity chains for firms and workers in
the global economy. This will advance our understanding not only of how
commodity chain dynamics might be leveraged to advance the goal of firm-level
industrial upgrading, but also how these chains, and the political and social
relations in which they are embedded, contribute to the process of uneven
development characterizing contemporary global capitalism.
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[1] A lively debate continues about the lessons to be drawn from the “East Asian miracle”, however. As has been widely noted (Amsden 1994; Wade 1996; Berger and Beeson 1998), the World Bank’s well-known assessment of the region’s success (1993) relied on a partial reading that emphasized the soundness of the region’s macroeconomic fundamentals and downplayed the prevalence of factors, such as industrial policy, that departed from neoliberal orthodoxy.
[2] The GCC
framework is not without its critics, however. One might summarize these
critics as making two main points. First, the empirical scope of this
literature is too narrow, with most studies to date focusing primarily on
commodity chains in a relatively small number of manufacturing industries and
concentrating almost exclusively on only one of the four chain dimensions
specified in the framework, (governance
structure) at the expense of the other three (Henderson et al. 2002). Second,
GCC research has not adequately considered the salience of the broader
institutional contexts in which chains operate (Czaban and Henderon 1998; Whitley
1996), nor has it succeeded in locating these networks within the broader
structure of a “hierarchical and
stratified global system” (Robinson 2002: 1053; see also, Raikes et al. 2000;
Dicken et al. 2001). Relatedly, the state remains undertheorized within this
framework, as does politics (including the way in which chains are inflected by
class and gender) more generally (Smith et al. 2002; Phyne and Mansilla 2003).
It is my hope that the preliminary agenda for a second generation of commodity
chain research sketched out in the final section of this paper will help
address some of these empirical and theoretical lacunae.
[3] I am grateful to Phil McMichael for pointing out that although the world-systems camp uses the term commodity chains without the “global” modifier, this omission does not suggest a less geographically expansive understanding of the construct. In fact, it suggests just the opposite—its conviction that such chains have been global in scope since the long sixteenth century.
[4] Drawing on
the work of David Harvey (1982), Smith et al. use a similar language in talking
about commodity chains in their recent discussion of macro-regional
integration: “Chains of commodity production and selling thus become mechanisms
to enable increases in productivity, reductions in the value of labour power
and reductions of the turnover time of capital to enhance the extraction of surplus value” (2002: 52).
[5] As Andrew Schrank has noted, the disjuncture between the world-systems and GCC schools was evident as early as 1995, in a review of Commodity Chains and Global Capitalism by Wilma Dunaway and Donald Clelland in the Journal of World-Systems Research. They criticize the volume for its developmentalist tone, lamenting that “[w]hat never appears in this book is the key idea that lies at the heart of understanding the international division of labor: unequal exchange. There is little or no attention to the central world-system thesis that exploitation and domination are structured at multiple levels of the commodity chains that are so painstakingly depicted.” Cf. McMichael 1995. See also the reply by Korzeniewicz, Gereffi, and Korzeniewicz in the subsequent volume (vol. 2) of the Journal of World-Systems Research.
[6] A sample of this literature which gives some indication of the range of industries studied include Bair and Gereffi 2002; Clancy 1998; Fitter and Kaplinsky 2001; Fold 2002; Gibbon 2001; Ponte 2002; Rabach and Kim 1994.
[7] In his original elaboration of the GCC framework, Gereffi (1994) identified only the first three dimensions. Institutional context was added later (Gereffi 1995), and remains the least developed dimension. While it is true that the other dimensions of commodity chains have received less empirical attention and thus remain theoretically underdeveloped, the emphasis in the GCC literature on governance stems from Gereffi’s interest in how globalization enables new forms of coordination and management, which in turn affect the composition, organization and geography of economic (and particularly industrial) activities. In this way, the development of the governance aspect of global commodity chains has laid the foundation for more detailed investigations of the other dimensions of GCCs that the framework identifies.
[8] In their recent discussion of the GCC framework, Henderson et al. criticize this dichotomy between the two types of governance structures, concluding that because the PDCC-BDCC “distinction is intended to refer to sectorally and organizationally specific empirical realities,” it is not “an ideal-typical construction.” However, this reading is inconsistent with descriptions of the governance forms found in the GCC literature (cf. Gereffi 1994: 96-99).
[9] For a particularly clear example of this influence, see the 2003 publication “Tehuacan: blue jeans, blue waters, and workers rights” by the Maquila Solidarity Network, which employs a general commodity chain orientation, and also draws substantially and fruitfully (though not uncritically) on GCC studies (particularly Bair and Gereffi 2001).
[10] In this context, it is worth noting a certain elective affinity between neoliberal conceptions of development (i.e. growth via market-driven global integration as opposed to state-led strategies) and the global value chain approach which examines the “possibilities for firms in developing countries to enhance their position in global markets” (Gereffi et. al 2004).
[11] These distinct emphases may be ignored by other observers who take the “contending concepts” as synonymous or interchangeable. For example, Ponte 2002 refers to “global commodity chain analysis (also known as ‘value chain analysis’)”: 1099.
[12] Although the authors acknowledge that local, national, and international “institutions and structures matter,” they conclude that “the variables internal to our model influence the shape and governance of global value chains in important ways, regardless of the institutional context within which they are situated.” Thus while they acknowledge the importance of institutional and regulatory factors, the authors specifically bracket them as external to their explanatory framework.
[13] While both the GCC and GVC frameworks take the organizational field of the industry as their analytical domain, the latter appears to make stronger claims about the sectoral logics of value chains at the industry-level to explain variation across industries, whereas the research in the GCC tradition looks to the different business strategies of lead firms as a way to explain variation in commodity chain organization within an industry.
[14] In his recent contribution to the new edition of the Handbook of Economic Sociology, Gereffi places greater emphasis on the similarities between GCC and GVC analysis, noting that the shift to the latter language was essentially a tactical decision designed to avoid two problems with the earlier vocabulary. Value chain is preferred to commodity chain because it “focuses on value creation and value capture across the full range of possible chain activities and products (goods and services), and because it avoids the limiting connotations of the word ‘commodity’” (2004 forthcoming, 18).
[15] Here Gereffi basically restates his earlier hypothesis that “development requires linking up with the most significant lead firms in the industry” (see p. 4 above). One way to translate this formulation into a testable hypothesis is that, among a population of firms, we expect that those with the strongest relationship to the lead firm will have the best development outcome (however defined). In order to test this hypothesis, we would want a research design that includes firms that are connected to the dominant player in the chain as well as those that are not. If we omit the latter from our sample, we are essentially sampling on the dependent variable, and cannot reliably conclude that the lead firm connection is a necessary, let alone sufficient, condition for development.
[16] The Gereffi, Humphrey, and Sturgeon article (2004) contains a similar slippage between the industry, firm and country levels of analysis: “The evolution of global-scale industrial organization affects not only the fortunes of firms and the structure of industries, but also how and why countries advance—or fail to advance—in the global economy.”
[17] This outcome was identified in the 1986 article by Arrighi and Drangel. Arrighi and Drangel argue that firms within commodity chains are constantly struggling to insulate themselves from competitive pressures by transferring less profitable activities on to other participants: “…economic actors (irrespective of whether they seek a remuneration for labor-power, assets, or entrepreneurial energies), far from accepting competition as a datum, continuously endeavor to shift, and some succeed in shifting, the pressure of competition from themselves onto other actors. As a result, the nodes or economic activities of each and every commodity chain tend to become polarized into positions from which the pressure of competition has been transferred elsewhere (core-like activities) and positions to which such pressure has been transferred (peripheral activities).”: 17
[18] By factors “external” to the chain, I mean to differentiate these from the sectoral characteristics privileged in the existing value chains theory, which refer to the micro linkages of production processes and transaction costs along the chain.
[19] The research also drew on earlier work analyzing the dynamics of the apparel commodity chain and its relevance for upgrading and development trajectories in East Asia (Appelbaum and Gereffi 1994).
[20] However, Mexico’s competitive position in the U.S. apparel market has been substantially eroded by China’s entrance into the World Trade Organization and the continuing phase-in of the Agreement on Textiles and Clothing (ATC). Patterns of trade in the global apparel industry today continue to reflect the regulatory legacy of the Multifibre Arrangement, and therefore widespread reconfiguration of apparel commodity chains is expected when all remaining quotas on textile products are lifted in 2005. See Begg et al 2003 for a comparable discussion of how changes in the trade regime affected the organization of apparel production in East-Central Europe.
[21] In explaining why “Moctezuma” attempted such an ambitious upgrading program when it did not appear to be in need it, Plankey Videla notes the importance of isomorphic pressures created by private consulting firms, international financial institutions, and state or local development agencies that encourage firms to undertake the type of restructuring that occurred at “Moctezuma.” Research on GCCs in developing countries (or the transition economies) should pay particular attention to the mimetic and normative force that the upgrading discourse can assume, especially when that discourse derives as much from the dissemination of “applied” value chain analysis as from popular management philosophies.
[22] Plankey Videla’s work also highlights the downside of the governance structure characteristic of buyer-driven chains. “Moctezuma” reorganized along lean production lines at the behest of the “big buyers” whose increased control over the commodity chain allows them to make ever greater demands on suppliers like “Moctezuma”, although they are often unwilling or unable to provide them with the increased technical and/or financial support necessary to fulfill these expectations (Collins 2001;Dussel Peters, Ruiz Duran, and Piore 2002; Humphrey and Schmitz 2001).
[23] Gellert underscores the implications of his analysis for the upgrading construct when he argues that although one might interpret Indonesia’s shift from timber exporter to plywood producer as a move up the commodity chain, “moving ‘up’ involves neither real movement nor, especially, national movement (as the image implies) as much as the capture of value-added or surplus value by particular actors as a result of political struggle along the chain”: (2003: 55).