What factors determine the success of global value chains?

1 GVC participation

The first factor that determines the success of GVCs is the degree and nature of participation. Participation refers to the share of a country's exports that are part of GVCs, either as inputs (backward linkages) or as outputs (forward linkages). The higher the participation, the more integrated the country is in the global economy and the more opportunities it has to benefit from GVCs. However, participation alone is not enough; the quality and diversity of participation also matter. For example, a country that only exports raw materials or low-value-added components may have limited gains from GVCs compared to a country that exports high-value-added products or services.

3 GVC spillovers

The third factor that determines the success of GVCs is the extent and impact of spillovers. Spillovers refer to the positive or negative effects that GVC participation and upgrading have on the wider economy and society, such as productivity, innovation, employment, wages, skills, environment, or social inclusion. Spillovers can enhance the development outcomes of GVCs, but they are not automatic or guaranteed. They depend on the characteristics of the GVCs, such as the type, complexity, and intensity of the activities, as well as the policies and institutions that shape the GVC environment, such as trade, investment, industrial, education, or social policies.

4 GVC resilience

The fourth factor that determines the success of GVCs is the ability to cope with shocks and uncertainties. Resilience refers to the capacity of firms and countries to adapt to changing market conditions, consumer preferences, technological innovations, or external shocks, such as natural disasters, pandemics, or geopolitical tensions. Resilience can ensure the continuity and sustainability of GVCs, as well as mitigate the risks and vulnerabilities that GVCs entail. However, resilience is not easy to achieve; it requires flexibility, diversification, collaboration, and innovation, as well as coordination and cooperation among different actors and stakeholders in the GVCs.

6 GVC governance

The sixth factor that determines the success of GVCs is the quality and effectiveness of governance. Governance refers to the rules, norms, and institutions that regulate and coordinate the GVC activities and actors, such as contracts, standards, certifications, or organizations. Governance can enhance the efficiency and transparency of GVCs, as well as ensure the compliance and accountability of the GVC participants. However, governance is not easy to achieve; it requires balancing the interests and power of different actors and stakeholders, such as lead firms, suppliers, governments, civil society, or consumers, as well as harmonizing the national and international policies and regulations that affect the GVCs.

7 Here’s what else to consider

This is a space to share examples, stories, or insights that don’t fit into any of the previous sections. What else would you like to add?