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Christine Zhenwei Qiang - An Investment Perspective on Global Value Chains

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Christine Zhenwei Qiang An Investment Perspective on Global Value Chains

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An Investment Perspective on Global Value Chains examines the role of foreign direct investment (FDI) in global value chains (GVCs). To stimulate economic transformation through GVCs, policy makers in developing countries need to better understand the business strategies of multinational corporations (MNCs), internationalization pathways for domestic firms, and how policies can create a favorable environment for both types of firms.

Part I brings together the latest theories and empirical evidence to illustrate the mutually reinforcing relationship between FDI and GVC participation. It argues that MNCs have driven the phenomenal rise of GVCs in the past three decades as they have unbundled production processes and spread their networks on a global scale. Domestic firms benefit considerably from their participation in GVCs as they learn from MNCs through investment, partnerships, or trade.

Part II includes six case studies examining the approaches of developing countries to leveraging FDI to stimulate and facilitate GVC participation and upgrading. The cases include Kenya (horticulture), Honduras (apparel), Malaysia (electronics), and Mauritius (tourism). Another case focuses on the digital economy for the Republic of Korea, India, and China. Each case study presents a different approach by which policy makers have leveraged FDI to stimulate and facilitate GVC participation and upgrading. A quantitative case study on Rwanda and West Bengal, India, uses firm- and transaction-level data to provide new insights into the dynamics between MNCs and domestic firms in selected value chains.

The report also discusses the recent COVID-19 (coronavirus) pandemic and its potential impact on FDI and GVCs. The out break has triggered new questions about GVCs and accelerated precrisis global trends such as digitalization and economic nationalism. How MNCs and their supplier firms respond to the supply and demand shocks as well as policy uncertainties will play a critical role in crisis responses and recovery.

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An Investment Perspective on Global Value Chains

Christine Zhenwei Qiang | Yan Liu | Victor Steenbergen

2021 International Bank for Reconstruction and Development The World Bank - photo 1

2021 International Bank for Reconstruction and Development / The World Bank

1818 H Street NW, Washington, DC 20433

Telephone: 202-473-1000; Internet: www.worldbank.org

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This work is a product of the staff of The World Bank with external contributions. The findings, interpretations, and conclusions expressed in this work do not necessarily reflect the views of The World Bank, its Board of Executive Directors, or the governments they represent. The World Bank does not guarantee the accuracy, completeness, or currency of the data included in this work and does not assume responsibility for any errors, omissions, or discrepancies in the information, or liability with respect to the use of or failure to use the information, methods, processes, or conclusions set forth. The boundaries, colors, denominations, and other information shown on any map in this work do not imply any judgment on the part of The World Bank concerning the legal status of any territory or the endorsement or acceptance of such boundaries.

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This work is available under the Creative Commons Attribution 3.0 IGO license (CC BY 3.0 IGO) http://creativecommons.org/licenses/by/3.0/igo. Under the Creative Commons Attribution license, you are free to copy, distribute, transmit, and adapt this work, including for commercial purposes, under the following conditions:

AttributionPlease cite the work as follows: Qiang, Christine Zhenwei, Yan Liu, and Victor Steenbergen. 2021. An Investment Perspective on Global Value Chains. Washington, DC: World Bank. doi: 10.1596/978-1-4848-1683-3. License: Creative Commons Attribution CC BY 3.0 IGO

TranslationsIf you create a translation of this work, please add the following disclaimer along with the attribution: This translation was not created by The World Bank and should not be considered an official World Bank translation. The World Bank shall not be liable for any content or error in this translation.

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All queries on rights and licenses should be addressed to World Bank Publications, The World Bank Group, 1818 H Street NW, Washington, DC 20433, USA; e-mail: .

ISBN (paper): 978-1-4648-1683-3

ISBN (electronic): 978-1-4848-1684-0

DOI: 10.1596/978-1-4648-1683-3

Cover design: Sergio Andrs Moreno Tellez, World Bank.

The Library of Congress Control Number has been requested.

Contents

Foreword

Acknowledgments

Abbreviations

Overview

PART I:

Chapter 1. Foreign Direct Investment and Global Value Chains

Key findings

Global value chains: Definition, measurement, and archetypes

Foreign direct investment and global value chains are mutually reinforcing

International production networks

Hyperspecialization

Leveraging foreign direct investment to upgrade into new global value chain archetypes

Chapter 2. Multinational Corporations Shape Global Value Chain Development

Key findings

Multinational corporations are the drivers of global value chains

The significant contributions of multinational corporations to global output and trade

Positive correlation between the importance of multinational corporations and trade value across sectors and countries

Multinational corporations objectives and strategies in global value chains

Bringing it together: Global value chain archetypes and multinational corporations business strategies

Superstar firms and the impacts on growth and distribution

Chapter 3. The Internationalization of Domestic Firms

Key findings

Domestic firm participation in global value chains: Pathways

Prerequisites to firm internationalization and global value chain participation

Global value chain upgrading: A learning process to improve competitiveness

Chapter 4. Using Investment Policies to Stimulate Global Value Chain Participation

Key findings

How investment policies can help global value chain participation

Foreign direct investment policy and promotion

Domestic firm internationalization policy

Strategy and approaches for global value chain integration

Chapter 5. Global Value Chains in the Time of COVID-19 (Coronavirus)

Key findings

Impact of COVID-19 (coronavirus) on foreign direct investment and global value chains

Firms responses to the disruption

Implications for developing countries

PART II:

Introduction

Qualitative case studies: Examples of approaches to foreign direct investment-led global value chain participation

Quantitative case study: A comparative analysis of firm dynamics in global value chains

Chapter 6. KenyaSupplying to multinationals exposed local firms to international horticulture markets

Ulla Heher and Victor Steenbergen

Chapter 7. HondurasUsing maquilas and international agreements to boost the garment industry

Monica Paganini and Victor Steenbergen

Chapter 8. MalaysiaAttracting superstar firms in the electrical and electronics industry through investment promotion

Maximilian Philip Eltgen, Yan Liu, and Yew Keat Chong

Chapter 9. MauritiusPartnering with foreign firms to upgrade the tourism industry

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