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Informal Workshop on The International Organization of Production:
A 'Commodity Chains' Approach(Geneva, 20-21 March 1995) | The Global Value Chain Concept in relation to the IILS Programme of Work |
| by Duncan Campbell and Aurelio Parisotto |
Background
Creating and keeping good Jobs is the main aim of employment policy anywhere. But employment relies more and more on markets and commercial relationships and even policy decisions beyond any one nation's borders. It is often pointed out as proof of this rising interdependence that the integration of the world's financial markets has reduced the ability of national monetary authorities to control interest rates, and thus to chart an independent macroeconomic policy. Yet there are other ways in which economic interdependence can be understood which also show that any one country' s control over employment is increasingly circumscribed. In an open marketplace, where competition is intense, the goods and services that are made and marketed, and the jobs that go with them, are the outcome of a sequence of related and dependent activities performed in a variety of locations around the world. What, as Gary Gereffi asks, "is an 'American' computer, a 'German' car .... or a 'Taiwanese' bicycle?".
When change of whatever origin now affects an industry - as, of course, it does constantly - it does so globally; the restructuring that results is a process that largely ignores national boundaries. Characteristic of the global restructuring of industry in recent years has been the growing spatial dispersion of the variety of activities that come together to make up the final product. There is, in other words, a growing spatial separation of the production of goods and services from their consumption; and, within this geography of international production, there is more locational choice than ever before, as nations alter their policies and construct the more liberal conditions that encourage participation in international markets.
While there is growing locational choice for many undifferentiated activities, there is also growing specialization, e.g. American movies, Swiss watches, French wine, Italian sweaters, etc. To achieve specialization is a key objective of governments toward the aim of creating high-quality jobs. But even such specialization does not necessarily imply that all of the activities and inputs that make up an American movie, say, or an Italian sweater, are owned and performed within each of those countries. The Key strategic inputs, however, are.
Changes in the spatial organization of production are shown by the sheer growth in the volume of trade and investment flows that link countries and the more widespread origins and destinations of those flows. But these merely quantitative measures would appear to miss the critical point, which is the qualitative change in the way much trade is conducted. Much international trade in goods and services cannot be thought of as a multitude of arm's-length transactions between countries. Instead, trade is organized within a structure or system of international production. In this sense, it is "internalized" within the common ownership of multinational enterprises, or "quasi-internalized" within a system of governance that links firms together in a variety of sourcing and contracting arrangements. Much international trade can therefore be said to be situated somewhere between "markets" and "hierarchies". Countries matter in this scheme, of course, but the commercial ties across firms better describe the process of interdependence. Countries can facilitate or impede the process, but the process itself is driven by the strategic behaviour of firms.
Enterprise strategies are thus the key to (1) understanding widespread and fundamental changes in the organization of production and (2) from this understanding to evaluate the consequences for employment, labour institutions and labour policy. This is why the Institute began its work on the microeconomic and micro-organizational aspects of globalization in 1991. In this framework, the multinational enterprise (MNE) was viewed as the "engine" of globalization. Its strategies were seen to be radically changing in response to the powerful stimuli that underlie globalization, deregulation and other policy liberalizing measures, rapid technological change, intense competition amidst slow growth, etc. An effort to understand the evolving world of corporate strategy was harnessed to the observation that strategic change meant organizational change, or changes in the structure of the firms organization of work and production. The consequences for labour arose directly from the latter, but could only be fully understood by knowing more about the former - enterprise strategy - e.g. Why were firms increasingly outsourcing production? Why were competing firms entering into cooperative relations through a variety of strategic alliances? Did new methods of production organization, such as "lean production", threaten or hold promise for the number and quality of jobs in traditional manufacturing?
A missing dimension in this purely micro level approach, however, was in understanding more fully what determined the competitiveness of the firm. The impact of new enterprise strategies must ultimately be reflected in a variety of measures of competitiveness or indicators of improved performance. But competitiveness itself is inherently a relative measure - i.e. competitive compared to whom? It is for this reason that the industry level of analysis is essential, for, as business strategists remind us, it is after all this level that defines the criteria for competitive success or failures: firms lose market share to competitors, i.e. those producing (delivering) the same product (service) or displacing demand for that product with a substitute. Industries are defined by their shared technologies and shared product markets. They may have distinctive cyclical peaks and troughs; shocks may be common to entire industries, although they reverberate in different fashions through different firms. Thus, while the focus on enterprise strategy remains the critical level of analysis and research, it is enterprise strategy as defined by, and relative to, competitors' that is most salient.
Now, however, it is becoming apparent that modern competitive conditions have greatly increased the ways in which the performance of firms in one industry affects the performance of those in others. In consequence, major firms now seek sources of competitive advantage at every step in the chain, that is, in every value-adding activity that affects their performance - whether they own or perform that activity themselves or not. For example, as Peter Doeringer observes, mass-marketed menswear in the United States represents an example in which large retailers have been the moving force behind the reforms in the production system. These retailers have followed the British pattern of defining style and outsourcing production to global contractors, but the largest retailers have also encouraged domestic apparel manufacturers to compete against foreign production by reducing "time-to-market" rather than by minimizing direct product costs. The large retailers have pioneered the forming of new alliances with garment manufacturers and have taken the lead in developing the new technologies and management practices (such as improvements in electronic data interchange) that are being adopted by all firms in these industries.
Two implications result from this: (1) one firm's own competitiveness may increasingly rely on the management of a set of activities covering many firms in more than one industry across many locations; (2) since this sequence of activities is international and inter-industry, traditional policy "geography" (i.e. national) and policy focus (i.e. industry level) may be inadequate - industrial restructuring cuts across national boundaries and also cuts across industries. Solutions that are narrowly targeted on particular industries that are in trouble could be to the neglect of policies that involve linkages among industries.
The Institute now proposes to explore a new analytical approach toward the changing spatial organization of production, using the concept of "production channels", as understood in the work of Peter Doeringer (Boston University &Harvard University) and Michael Piore (MIT), or, the equivalent concept, "global commodity chains", as developed in the work of Gary Gereffi (Duke University). The concept would also seem identical to the " productive systems" described in Frank Wilkinson's work. The present paper will refer to the chain/channel concept as it is often understood in the business strategy literature, i.e. as "value-adding" activities linked together. The reference - provisional, to be sure, and not entirely satisfactory - will thus be to "global value chains".
These chains or channels, in the Doeringer/Piore definition, are the chains of suppliers, manufacturers and distributors that begin with the manufacture of basic inputs and end with the marketing of the final product. Firms at different levels in the chain are joined together through various types of backward and forward linkages ranging from exclusively market-mediated transactions, to dependent relationships (such as those established by dominant multinational enterprises), to cooperative relationships (such as those found in the industrial districts of northern Italy), to complete vertical integration. Such chains also include an affiliated "infrastructure" of equipment vendors, information networks, transportation systems, and banking and financial institutions, and they may have ties to informal micro-enterprises and household production.
These networks of interfirm relationships are the way that most progressive businesses think about how to organize economic relationships. For these firms, the challenge of adjusting to "globalization" is really about how to redesign the organizational relationships among the components of the value chain, and devising new workplace production systems within that chain. As such, the focus on enterprise strategy remains paramount, and different firms will have both a different set of strategic options and a different capacity to control their own destiny, depending upon where they are located in the chain.
At the same time, however, countries or subnational locations are faced with different policy options according to their "place" in the chain. The sorts of inter-firm relationships that chains comprise govern the geographical distribution of production and jobs. A key policy concern therefore relates to the choices governments face and the costs and benefits of participation in these chains, and which policy levers are available for attaining initial locational advantage, retaining that advantage, and improving upon it, thereby ensuring widespread beneficial impacts of participation. It is not, therefore, just the strategy of the firm that matters, but the strategic options available to all economic actors wherever they are located in the international organization of production. Many governments have been faced with a set of defensive policies, focussed on deregulation and structural adjustment. A better understanding of global value chains may hold the keys for finding better ways or achieving balanced and sustainable employment growth.
As Gereffi has pointed out, commodity chains have four dimensions:
1. an input-output structure, or sequence of economic relationships;
2. a territoriality or geography described the spatial organization (whether dispersed or concentrated) of the chain;
3. a governance structure of authority and power relationships (who is "driving" the chain);
4. institutional and regulatory influences on the chain.
The remainder of this paper looks at each dimension from the standpoint of the sorts of questions it might raise for the Institute's programme of work. The global value chain concept offers a unifying framework for the study of enterprise strategy, the governance of the chain, and labour policy implications arising from industrial transformation in the global economy.
The Input-Output Structure of Chains
Central to the value chain concept is that the goods and services consumed in final markets are themselves the product of several divisible or discrete stages of economic activity. Within this perspective, input-output analysis quantifies these inter-industry relationships and offers a means of evaluating the impact across industries of changes in final demand. This same analytical perspective is also applied to the analysis of the direct and indirect employment impacts of industrial demand. "Labour requirement coefficients" provide a measure of the "multiplier" effect of, for example, the automobile industry in terms not only of the direct jobs it generates, but those generated upstream and downstream in the value chain. In the early 1980s, the labour requirement coefficient of US auto production was measured at 4.87 - every direct job in the industry indirectly generated an additional 4.87 jobs elsewhere in the chain.
Surely one of the more intriguing propositions of the global value chain approach is that in the world's major product and services markets, it is increasingly inappropriate to think of purely "domestic" industries. This, again, is another way of saying that the level of trade in intermediate goods and services is rising. Essentially, what is needed is an international input-output approach that would relate the contributions to any given global value chain to their location of origin. Such an approach, a quantification of inter-industry linkages across countries, exists for some industry groupings through data put together by the OECD. Employment implications have been drawn from these. For example, the OECD finds for the international aerospace industry that, for every job created in the Canadian aerospace industry, an additional five are generated in the same or related industries in other countries.
It is useful to think of these trends as posing significant challenges for the traditional aims and methods of national policies. Consider the following example. In a recent year, US manufacturers of liquid crystal display units (LCDs), a main component in laptop computers, charged Japanese producers with dumping their LCDs on the US market, and persuaded the US trade authority to take up their case. It so happened, however, that US domestic computer manufacturers relied on Japanese LCDs, not domestically produced ones. The computer makers argued that a dumping sanction directed against the Japanese - in the aim of protecting the jobs in the US LCD industry from unfair competition - would, in fact, have a serious impact on the price competitiveness of the US computer industry. The point is that the global value chain approach offers a unique perspective on such questions as, "what is a domestic industry?" or "what is in the national interest?".
Geography of the Chain
Growth has slowed since the 1970s, but the geography of the world economy is expanding as international production expands through the liberalization of domestic trade and investment regimes in many developing countries, as well as their orientation toward export markets. In 1994, an unprecedented 40 percent of the world's foreign direct investment flows were directed to developing countries. More deeply integrated commercial linkages between North and South are a measure of just how fragile is the dichotomy between developed and developing: The distinction may still have some sense in political groupings, but in economic terms - in terms of industrial organization - it is being vastly superseded by a blurring of boundaries and roles. What are the factors accounting for the shifting geography of value chains and how rapidly indeed are they shifting?
Analysis of these issues from the global value chain perspective offers a channel through which topics of much greater policy weight are currently being voiced, e.g. does trade with the South damage employment in the North? Will cost advantages in developing countries lead to a "hollowing out" or "delocalization" of Northern industry?
Some of these concerns relate to the locational decisions of firms participating in international value chains. One way of thinking about the range of such decisions is in terms of the relative advantage or relative insignificance of proximity, whether between certain links in the chain or to the final market for the product or service. Two criteria here are likely to be very important (although not solely important) - the firm's cost structure and product market strategy. With open markets, labour-intensive production will clearly gravitate to those lower cost environments where cost-based comparative advantage lies. This sort of industrial migration, which tends to "lengthen" the value chain, can be assumed to be relatively unstable or "fleeting", as the business strategist Michael Porter describes - labour and other production cost advantages are relatively soon lost to the new, low-cost entrant in the chain.
Second. where costs are the most important competitive variable, this is the world of relatively standardized products. Now competition can be intense or volatile even for these products, but the competition is not based on product variety and rapidly changing consumer tastes, it is based on price. The lower end of the footwear apparels industries fits this particular chain geography. So does simple electronics components assembly, a garments-like job in an otherwise high-tech industry, or simple data entry which, through communications in real time, means that such value-adding activities can be located where costs are lowest anywhere in the world. (The major industries in the world's export processing zones are two: garments and electronic components. Both use (1) labour-intensive, low-skilled processes of (2) standardized products that (3) have a very high volume/weight ratio and so can be transported across the world at low cost.
On the other hand, as much of the business strategy literature underscores, product life cycles are becoming shorter. competition is more intense in a world marker of slower growth, consumers are more affluent, informed. and demanding, technological change is rapid. In apparels, this is reflected in the rise in the number of fashion seasons, in automobiles, by the reduced number of years it takes for a car to move from the drawing board to the sales floor. Product markets that were once more homogeneous have segmented into niches, and firms now describe themselves as "consumer-oriented". Competitive strategies based on quality, rapid innovation, and differentiation. favour proximity to final markets first, because the response can be more rapid, and second, because non-price competitive factors (quality) service, product differentiation) are of relatively greater importance than, say, the cost of labour or other factors of production. Tendencies such as these argue for a value chain that in geographic terms may be "deep" rather than "long". Consider, for example, the unusual case of the dense, cooperative organization of the Italian textile and clothing industry, in which a high percentage of value remains domestic in spite of being a "traditional" industrial sector in a "high-wage" country (and one, therefore, that should long ago have migrated to lower cost locations). As recently as 1988, only 6 percent of the total production value of the industry in Italy came from outside the country. That figure has increased significantly since, but it is still rather low in comparative terms. Without developing the point, the economics of Italy's clothing industry is based heavily on close collaboration among small firms in different industries involved in the chain - and proximity is a necessary ingredient in this type of competitive strategy.
The geography of value chains would, therefore, seem to rely part on whether competitive factors are primarily those of "comparative advantage" - or the price and quantity of factor endowments, whether these be palm trees or abundant, inexpensive labour - or those of "competitive advantage", a variety of non-price factors that can be acted upon or "created" by firms - and, indeed, by governments and other actors.
Finally, one can think of how the impact of information technology on the "economics" of proximity could be very great, but the impact would seem to pull in opposite directions. On the one hand, it enables former barriers of time and distance to be handily overcome, and thus renders proximity less relevant, the location of service activities such as the (often cited) software industry in Bangalore. India seems to offer no penalties based on distance to its East Asian and North American links in the chain. Moreover, as suggested earlier, technological advance, in promoting the tradeability of services, may be one factor behind the rising tendency for firms to locate not just whole lines of business, but - more narrowly - specific business functions, (e.g. accounts processing), in locations with the best mix of advantages.
But the effects of technology also enable proximity to final markets. or "relocalization" Process technologies may both reduce labour in total costs and thus remove an incentive for going offshore, as well as contribute to more non-price-based or niche product market strategies by increasing the cost effectiveness of small-batch production. In this way, process technology innovations may undergird a strategy of "flexible specialization" (Piore and Sabel, 1984). Do these dimensions help in explaining actual industry trends? In the European textile and clothing industry all of these tendencies are in evidence. although the trend toward delocalization would seem dominant. Moreover, once the market leaders adopt an offshore sourcing strategy that significantly lowers costs upstream in the value chain, competitors are fairly well compelled to follow suit (Scheffer, 1994). The outcome may be leading to the regionalisation of production, as "high-cost" locations take advantage of near-by low-cost sites for production activities: technological advances such as electronic data systems that enable direct and immediate relay of point of sales information to inventory and production planning remove some of the disadvantage of offshore sourcing of products. But, as argued above, fashion seasons that more rapidly succeed one another in relatively high-margin niches of the clothing market could favour domestic production - i.e. staying close to the final consumer market. Improvements in technology allow firms to reconfigure the geography of the apparel chain in order to take advantage of both low production costs and rapid market responses in a regional approach to organizing production.
Governance of the Chain
What factors influence or "drive" the distribution of control and power relations across the value chain? The prominent role of major multinational enterprises in forging linkages across firms and national boundaries is the central "driver" of globalization: in a general sense, of course, these relationships are established in the most developed countries and wealthiest markets, and extend outward from this core to a periphery of locations. Beyond this observation, however, Gereffi identifies two distinct types of international industrial organization through value chains - two types of chain governance. Producer-driven chains are characteristic of those industries in which multinational enterprises "play the central role in controlling the system including its backward and for-ward linkages", and include such capital and technology intensive industries as automobiles and computers. It is thus the manufacturer that plays the predominant role in establishing the terms and conditions of production in components and supply industries, as well as the conditions of final distribution. In contrast, buyer-driven chains "refer to those industries in which large retailers, branded marketers, and trading companies play the pivotal role in setting up decentralized production networks in a variety of exporting companies, typically located in the Third World." It is thus the distribution channel that drives production. While this is most obvious in the case of retail or department stores, such as Marks and Spencer, it also applies to "branded firms", such as Nike and Reebok in footwear, or The Gap in apparel. The latter are associated with products that bear their name, but, for the most part, own no production facilities. They are, instead, "marketers that design, but do not make, the branded products they order".
Do these distinctive types of industrial organization also refer to distinctive geographies', To some extent, this would appear to be the case. Buyer-driven chains, such as apparel or footwear, are characteristic of substantial, labour-intensive phases of production. and thus of locations in which the traditional basis of comparative advantage lies in factor costs such as labour. One would expect the international organization of, say, the machine tool industry to span fewer geographical cost or development levels. The difference between the two is where the barriers of entry to competition in the chain are greatest (Gereffi and Korzeniewicz, 1994). For the apparel chain, actual production requires relatively little capital or advanced skills and can thus be located where costs are most favourable. Machine tools, however, are both capital- and skill-intensive which both minimizes the importance of labour costs and narrows the locations where appropriate inputs can be found.
The governance of chains would appear to be moving away from production to distribution - that is, becoming more "buyer-driven". In the sorts of industries in which industrial organization can be described as producer-driven, this governance shift is reflected in the higher service component of traditional manufacturing - in marketing, in design, in distribution. This shift would seem reflected in the views of many managers that it is increasingly the customer who is "calling the shots", whose demands in terms of price, quality and product differentiation have increased the importance of the downstream function of distribution and service. The difference, as Gereffi notes, is between the older "I will sell what I make", and the newer view "I will make what you need". In computers, it is the tendency for major manufacturers to place increasing emphasis on the service function of systems consulting for clients, irrespective of who actually made the hardware or software.
The governance question is also closely related to that of chain ownership. The economic ties in any value chain are established either through the common ownership of links in the chain, as, for example, through the common ownership by a multinational enterprise of its foreign affiliates, or through contract. Here, there are two major tendencies to underscore. First, there is in the view of many business strategy writers and other economists, a clear and marked trend away from the vertically integrated firm in which all value-adding activities, even those peripheral to the firm's main activities, were owned. Firms, it is argued, have for a variety of underlying reasons returned to their "core competencies", contracting out for activities they once owned and performed in-house. Again, the 'Key principle here is that greater competition has required firms to take a close look at the competitive performance of each, individual value-adding activity. This often translates into a "make" or "buy" decision, since it may be cheaper, better, and less risky (i.e. through increased flexibility) to purchase rather than to own.
A second observation that is often made is that interfirm relations have not merely grown in number, but evolved along qualitative lines as well. The competitive value of cooperation, of establishing long-term relations, of information-sharing is argued to be diffusing - at least as it characterizes the activities of major final assemblers or retailers with a first tier of subcontracting firms. Even if this is true, however, it is likely to be a trend that coexists with its opposite; that is, with conditions that deteriorate as one descends the hierarchy of contracts. The "bottom of the chain" in the apparel industry has been argued to pose these concerns most sharply.
A third aspect of the governance question relates to the variety of implications that a given unit's/location's place in the value chain holds for its sustainability and improvement. Power relations and strategic options clearly vary, and this observation has two-fold significance. First, it is appropriate to think of enterprise strategies at every location in the chain. When Volkswagen decides to change its worldwide subcontracting policy, or when a major retailer replaces its domestic manufacturing sources with foreign ones, the reverberations of such major strategic initiatives are felt up and down the chain. Still, at each location, a range of strategic options exist and will differ, and the factors shaping those options will differ as well.
Second, it is appropriate to think of strategic options as applying to other actors than just the firm. Local authorities, for example, will be interested in the sort of spillover or multiplier effects that a particular position in an international value chain conveys. Gereffi, for example, argues that developing country locations can link to international markets in an ascending range of functional ways. Primary commodity exports or mere assembly for export of imported inputs may represent only the most minimal of such linkages, either the least profitable or least sustainable positions. As, however, locations ascend the hierarchy of strategic positions within the chain, the multiplier effects increase. For example, original equipment manufacturers (OEM), under contract to brand name producers often use the technology transferred to them as a springboard for independent market entry. They also are far more likely than the assembly unit in an export processing zone to build substantial backward and forward linkages in the local economy.
What factors account for the upgrading or moving up market of links in the value chain? It is here where the strategic options of other actors can play a significant role. As Henderson (1993) observes. the policy orientation and specific actions of the national and local state play a major role in determining whether foreign direct investment can be the trigger for a sustainable local industrial development path, or whether local industry remains dependent for its existence or competitiveness on infusions from MNEs. A global value chain approach could help in mapping out a sort of "taxonomy" of models and policy options of how local development and employment growth can vary depending upon differences in industrial organization - and differences that institutions and policies directly influence. Here, again, one thinks of the institutional basis of the Italian industrial district model and of all of the ways it differs (policies, industries, firm size, product market strategies, regulatory environment, and more) from the opposite end of the spectrum, e.g. the export processing zone.
National Institutional or regulatory Patterns and Value Chains
The thesis, both of some serious academic work, as well as of a number of recent popular titles, e.g. Capitalism v. Capitalism, Looking at the Sun, etc, is that nations whose economies are otherwise organized around market principles nevertheless show rather distinctive styles of capitalism. In the United States, for example, it might make perfect sense for a firm whose labour costs are high to relocate production in a low-wage country and then export the product back to the US market. Such, according to the journalist, James Fallows, is a good example of the "consumer welfare mentality" of American capitalism. It differs strikingly, says Fallows (1994, p. 266), from the production-minded mentality of the Japanese or Germans. Here is his account of the effects of "endaka" or the rapid upward valuation of the Japanese yen following the Plaza accord of 1985 on industry:
The entire process of corporate globalization operated on different assumptions [than American ones] when Japan responded to the nightmare of endaka. The idea was not simply that machines once made in Osaka could be made instead in Singapore and sold, more cheaply, to the same customers back in Japan. The concept was instead that cheaper production sites beyond Japan could be incorporated, with the Japanese headquarters firms, into a production system that could export to yet other countries (in practice, mainly to the United States). It was, once again, a producer-minded rather than a consumer-minded strategy. The Third World sites would not replace or compete with factories in Japan, for the benefit of the Japanese consumer. The new plants would augment and supplement what already existed in Japan, to strengthen the Japanese productive base.
Differences in regulatory styles, of course, abound across many dimensions; e.g. views on the appropriate role of the state in the private economy would yield a kaleidoscope of options. These differences shape the incentive structures faced by firms, and we should not therefore be surprised to find that the spatial organization of value chains may be nationally distinctive. The relationship of a firm's shareholders and, more broadly, stakeholders, to its management, its board of directors, to the banks that finance it, as well as to other firms - topics related to corporate governance - is bound to be place-specific. This is one reason why it is likely to assume that the sort of relationships that Marks and Spencer establishes with its network of suppliers is probably quite different than those, say, of Matsushimaya's with its supply firms.
There is a growing interest in and a growing literature devoted to explaining the institutional bases of the relatively long-term strategic focus of Japanese or German industry relative to American or British industry. Understanding more about the ways in which global value chains are constructed and governed participates in this line of inquiry, and could shed much light on how industrial organization obeys economic laws that are deflected and channelled by a host of different institutional and regulatory styles. As one example, consider Wilkinson's explanation of why Italian knitwear market is less penetrated by imports:
Britain and Italy are faced with intensive competition from low wage producers but the British market is much more heavily penetrated by imports than the Italian. This difference can be explained to an important extent by the differences in the links between manufacturing and distribution in the two countries. In Britain the large chain stores which dominate retailing are the vehicle for importing. In Italy, by contrast, manufacturing and distribution are closely integrated. Manufacturing firms market their own products to the highly decentralized retail sector providing distributional networks which prove difficult for imports to penetrate.
Institutional and regulatory differences which, in turn, result in differences in how value chains are structured may be quite important areas to research. For instance, it is one approach to studying the employment consequences of industrial policy, since the global value chain concept directs one's attention to both, rather than leading to the (more usual) separate focuses on industry policy and employment policy.
List of key topics to be addressed in the informal workshop
The notion of global value chains and the like (commodity chains, production channels, productive systems etc.) is particularly appealing for the emphasis it places on the organizational links and coordinating requirements between processes that cut across national borders and traditional divisions by industry. In order to use this notion to investigate industrial transformation and distil policy prescriptions of interest to ILO constituents, there is a need to elaborate further the notion itself, identify research questions and outline a concrete research trajectory. The workshop is expected to provide some indication of priorities in this respect. To open the discussion, the following is a tentative list of key topics and questions to be dealt with in the Institute projected programme.
a) A deeper understanding of enterprise strategy is a first expected outcome of adopting a "chain" perspective. Is such a perspective useful in mapping the current strategic concerns of managers? Does it provide a framework to describe and understand the organizational tensions business is confronted with in the volatile economic environment? Could it give insights, for instance, on the emergence of networked forms of production and inter-firm relationships that are "neither market nor hierarchy" (customised subcontracting, franchising, joint ventures etc.)?
b) What forces control the governance and configuration of the chains? Is the distinction between buyer-driven and producer-driven chains adequate to identify the strategic drivers? Is the rationale behind this distinction solid? Is there a shift from manufacturing to services, distribution services in particular, in the governance of chains in various industries? Does this reflect the growing need of firms for closer links with customers? What is the role of technology in this process?
c) What forces determine the geography of the chains in a given industry and the changes in their spatial configuration? What is the role of local institutional and regulatory factors? To what extent can various segments of a chain be geographically separated without losing some critical aspect of the "home" manufacturing base? Can issues of locational decisions, regionalisation of production systems, industrial migration and restructuring be adequately framed within a chain perspective?
d) How do enterprise strategies and value chains affect national and local development and employment growth, compensation and job quality and labour institutions? For instance, do "best" workplace practices spill over throughout the chain? If distant labour markets are linked through chain relationships that are not internalised within firms nor in the realm of the market, how does market power relate to social responsibility?
e) What are the policy implications for governments, unions and managers of thinking in chain terms? Does it allow governments to better grasp new industrial and labour policy options to strengthen or upgrade industrial specialization and create sustainable, high-quality jobs? Does it open new perspective on the role of locationally specific factors such as quality, adaptability, skills and training of workers or the quality of tripartite dialogue and cooperation? Are traditional organizational forms of unions concordant with the organization of production along value chains? Does the chain perspective bring a new light to the role of workers' and employers' organizations?
f) How could the projected Institute programme. with its emphasis on globalization and enterprise strategy in a chain perspective. best contribute to the definition of ILO policies and strengthen its role in the governance of the international economy?
g) Finally, a pivotal study of "buyer-driven" chains in the textiles and apparel industry is proposed as a main step in elaborating the chain approach and testing its relevance to address Institute and ILO concerns. How can the study contribute to a better conceptual definition of the chain notion? How to collect quantitative information on the chains, such as output, employment, productivity etc.? Which other industries and examples of "producer-driven" chains might be the most useful object of research?
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