POWER CONCENTRATION, PRODUCTION FRAGMENTATION, AND LOCAL UPGRADING IN THE GLOBAL VALUE CHAINS
MEI Li-xia1,2, WANG Ji-ci1
1. College of Urban and Environmental Sciences, Peking University, Beijing 100871, China;
2. Center of Globalization, Governance and Competitiveness at Duke University, USA
Abstract Power concentration by global leading firms (GLF) and production fragmentation by tremendous small and medium suppliers from developing economies have reshaped the global production network and the value chains together, causing asymmetric value distribution along the global economic landscape. The paper regards the power from GLF as an asymmetric discourse based on strategic sources, including:technology capability, products design, marketing strategy, fast fashion, market channels, low costs, supply chains capacity, and network. Among them, leading technology and marketing are always the decisive factors for the success of GLF. It is these leading advances that make the market power more concentrated than before, produce huge market profits to GLF, and shape the geographical distribution of GLF and the innovation. However, the market power concentration doesn't necessarily result in global production concentration. On the contrary, the current global production networks are more and more concentrated dispersion. With the intensified competition for multinational corporation investments between different low cost places, the learning speed and innovation capability of local firms have become the key variables to break through limitations from GLF and to improve local industrial competitiveness. It concludes that insertion into global value chains brings benefits of improving production capabilities, accessing global markets and advanced technologies to local producers in developing countries, which doesn't necessarily result in upgrading from production capability to innovation capability in the global value chains. Global production fragmentation can bring knowledge decomposition and innovation diffusion, but the upgrading of local industries depends on the absorptive capacity and learning speed of local firms.
2009, Vol. 24 
