1. Upgrading in Global Production Networks: State of the art
Presented at the Global Production Networks Centre at NUS Launch Workshop, January 2015
National University of Singapore
Stefano Ponte
Professor of International Political Economy
Department of Business and Politics
Copenhagen Business School
Affiliation
Title
15 years
LICs, Africa
Agro-food and energy GPNs
Constructive dualogue with NUS researchers
Lots of excitement internationally for what you are trying to accomplish here (and a bit of envy); good for NUS!

2. Why are GPNs important?
GPNs can lower barriers to entry for developing country producers and service providers and open up specialized industry segments for export
do not necessarily need to build a whole industry back-to-front
But also risks of
exclusion, marginalization
inequality, social polarization
immiserizing growth
increasing economic activity with declining real incomes

3. Key debates Governance of GPNs
Challenges and opportunities in GPN participation
Geographic configurations
Institutional frameworks
Upgrading

4. GVC participation= foreign value added in a country’s exports; indicates integration in a multistage trade process
Source: UNCTAD 2013: 22

5. Source: UNCTAD 2013: 23

6. Upgrading Improve value addition Classic distinction:
Process upgrading
Product upgrading
Functional upgrading
Inter-chain upgrading
product upgrading: moving into more sophisticated products with increased unit value, or with more complex content, or that match more exacting product standards;
process upgrading: achieving a better transformation of inputs into outputs through the reorganization of productive activities, and/or from improving standards in quality management, environmental impact and the social conditions of production;
functional upgrading: acquiring new functions that increase the skill content of activities and/or improve profitability (for example, moving from production only to production and primary processing);
inter-sectoral (or inter-chain) upgrading: applying competences acquired in one function of a chain and using them in a different sector/chain;

7. Smile-curve of value added
Baldwin et al 2014

8. Upgrading (cont) Also important:
Volume
economies of scale
Portfolios of qualities
economies of scope
Other valorization processes
Fair trade, geographic indications, branding
Some trajectories actually involve downgrading as well
Important in periods of crisis

9. What factors explain upgrading trajectories
What factors explain upgrading trajectories? Case study of aquaculture GPNs in Asia
EU-funded research project (SEAT)
Aquaculture production networks originating in Asia
Tilapia, shrimp, prawns, pangasius
China, Vietnam, Thailand, Bangladesh
Focus on production and processing nodes
Upgrading in terms of:
Improving product, process, volume and/or variety (in the same node of the GPN)
Changing and/or add functions (up- or downstream; in several nodes)

10. GPN governance and upgrading

11. Public sector support and upgrading

12. Upgrading: New analytical frontiers
Social upgrading
Capturingthegains.org
ILO ‘better work’ framework
Environmental upgrading
Minimizing the environmental impact of production
with equal or improved economic performance
energy savings, new materials, new systems
Driving forces
limits of buyer-driven greening
ecolabels
Transmission mechanisms

13. Conclusion Opportunities and challenges in:
GPN participation
Economic, social and environmental upgrading
Upgrading answer is not always in ‘trading up’
volume still important, wider portfolios (including lower quality), emerging markets and end-market diversification
Regulation and public sector support
Important, but helps mostly product and process upgrading
Needs to be devised in view of actual functioning and governance of value chains