John Humphrey

The governance of global value chains

Abstract This article builds a theoretical framework to help explain governance patterns in global value chains. It draws on three streams of literature – transaction costs economics, production networks, and technological capability and firm-level learning – to identify three variables that play a large role in determining how global value chains are governed and change. These are: (1) the complexity of transactions, (2) the ability to codify transactions, and (3) the capabilities in the supply-base. The theory generates five types of global value chain governance – hierarchy, captive, relational, modular, and market – which range from high to low levels of explicit coordination and power asymmetry. The article highlights the dynamic and overlapping nature of global value chain governance through four brief industry case studies: bicycles, apparel, horticulture and electronics.

How does insertion in global value chains affect upgrading in industrial clusters

Humphrey J. and Schmitz H. (2002) How does insertion in global value chains affect upgrading in industrial clusters?, Reg. Studies 36, 1017–1027. What is the scope for local upgrading strategies where producers operate in global value chains? The literature on industrial clusters emphasizes the role of inter-firm co-operation and local institutions in enabling upgrading. The value chain literature focuses on the role of global buyers and chain governance in defining upgrading opportunities. This paper argues that clusters are inserted into global value chains in different ways, and that this has consequences for enabling or disabling local-level upgrading efforts. It pays particular attention to the position of developing country firms selling to large, global buyers.

Governance and Trade in Fresh Vegetables: The Impact of UK Supermarkets on the African Horticulture Industry

Production of fresh vegetables for export has grown rapidly in a number of countries in sub-Saharan Africa over the last decade. This trade brings producers and exporters based in Africa together with importers and retailers in Europe. Large retailers in Europe play a decisive role in structuring the production and processing of fresh vegetables exported from Africa. The requirements they specify for cost, quality, delivery, product variety, innovation, food safety and quality systems help top determine what types of producers and processors are able to gain access to the fresh vegetables chain and the activities they must carry out. The control over the fresh vegetables trade exercised by UK supermarkets has clear consequences for inclusion and exclusion of producers and exporters of differing types, and for the long-term prospects for the fresh vegetables industry in the two major exporting countries studied, Kenya and Zimbabwe.

Trust and inter‐firm relations in developing and transition economies

The role of trust in facilitating economic growth has been highlighted in previous contributions to this journal. In order to take this debate forward, this article argues (1) that more attention needs to be given to the relationship between sanctions and trust, and (2) that it is worth distinguishing between the minimal trust for making markets effective and the extended trust required for deeper kinds of inter-firm co-operation to work. The article goes on to ask why minimal trust is lacking and so hard to construct in the republics of the former Soviet Union. It then examines how extended trust grows or can be made to grow in industrial supply chains and clusters in developing countries.

Changing Governance Patterns in the Trade in Fresh Vegetables between Africa and the United Kingdom

Over the past twenty years the marketing of African fresh vegetables in the United Kingdom has become dominated by large retailers that have adopted competitive strategies based on quality, year-round supply, and product differentiation. This has led to a dramatic change in marketing channels, from wholesale markets to tightly knit supply chains. Global value chain analysis is used to explain why the various stages of production and marketing have become much more closely integrated and to consider the likely outcome of a further round of restructuring occurring at the present time. Although the current trends may lead to a changing role for importers, the tendency towards the concentration of production and processing in Africa in the hands of a few large firms is likely to continue.

The Triple C approach to local industrial policy

Abstract In both developed and developing countries there is mounting evidence that clustering and networking help small- and medium-sized manufacturers to raise their competitiveness. The role of public policy in this process is less clear. The European experience suggests that local and regional government can play an important role. Equally, if not more, interesting experiences can be found in developing countries. Their analysis constitutes the core of this paper. The lessons can be summarized as the “Triple C” which stands for customer-oriented, collective and cumulative.

Upgrading in Global Value Chains

Examines whether the relocation of labour-intensive or unskilled assembly activities to developing countries raises overall skill requirements. Argues that these firms may stay dependent on the lead company in the international production network but could also be integrated into the global economy.

Understanding the Complexities of Private Standards in Global Agri-Food Chains as They Impact Developing Countries

Abstract The increasing prevalence of private standards governing food safety, food quality and environmental and social impacts of agri-food systems has raised concerns about the effects on developing countries, as well as the governance of agri-food value chains more broadly. It is argued that current debates have been ‘clouded’ by a failure to recognise the diversity of private standards in terms of their institutional form, who develops and adopts these standards and why. In particular, there is a need to appreciate the close inter-relationships between public regulations and private standards and the continuing ways in which private standards evolve.

The Global Automotive Industry Value Chain: What Prospects for Upgrading by Developing Countries

The paper opens by mapping the changes in the global auto industry in the 1990s, showing how the rapid growth in sales and production between 1990 and 1997 came largely from the emerging markets rather than the Triad regions (North America, the European Union and Japan). However, for some of these markets the downturn that followed was substantial and prolonged. The emergence of regional production systems resulted in regional integration. This created opportunities for industrial upgrading in developing countries with links to one of the Triad regions, where a major part of production still takes place. The paper then describes how the relationship between assemblers and suppliers has changed. There is a growing preference for using the same suppliers in different locations (follow sourcing), which limits the possibilities for component supplying by local producers in developing countries. However, opportunities in second-tier sourcing, where a global reach is not required, do exist. The paper shows that developing countries can increase the possibility of integration into the global value chains of transnational automotive companies by opening up their domestic markets. It concludes with emphasizing the importance of fostering networks of small firms in developing countries as a means of entering new markets.

Globalization and supply chain networks: the auto industry in Brazil and India

The automotive industries of emerging markets were transformed in the 1990s by trade liberalization and large investments by global assemblers. The impact of these investments was decisively influenced by government policies aimed at promoting local production and assembly of vehicles and by changing assembler—supplier relationships in the global auto industry. The cases of Brazil and India show how the assemblers created new linkages between operations in emerging markets and their global operations through the adoption of follow design and follow sourcing policies. These policies were hard to implement in practice, but they decisively transformed the components industries in both countries.