Peter Dicken 2015 Capturing Value Within

© Peter Dicken 2015

‘Capturing Value’ Within Global Production Networks Global Shift Chapter 8

Review • Concepts to Review – GPNs; codified and explicit knowledge; bargaining between TNCs and local economies; geographical inequalities; integration versus responsiveness • Key Words – Stakeholders, value creation, knowledge management, labour strategies

Concept of Value • Definitions – ‘Economic rent’ – Value is surplus above cost in performing the transformations at that stage – Raises issues beyond firm competitiveness and profitability • GPNs and value – Value in GPN is created, enhanced and captured where its parts are located – A place’s involvement in GPNs creates net benefits/costs – Concern over firms transferring activities out of home countries – Defensive investment: taken to protect markets and ensure that the firm prospers, which consequently helps the domestic firm

Value of a Particular Locality • A firm’s organizational ecology – intra-firm relationships – inter-firm relationships – firm–place relationships – place–place relationships • Dimensions of a place’s involvement: • Net gain to host country depends on trading practices of TNC • Local link formation by TNCs depends on three major influences – the TNC’s strategy – characteristics of local economy – time • Criticism: many TNCs procure only low-level inputs from local sources • Differences between dependent and developmental linkages

Value and Diffusion • Knowledge Transfer and GPNs – Knowledge transfer to local population in terms of training – Does not guarantee that the benefits of this knowledge will be diffused through the host economy – The nature of the TNC inhibits the spread of proprietary technologies – Evidence for technology transfer to developing countries is mixed – Knowledge transfer requires absorptive capacity on the part of locals – Both codified and explicit knowledge required for knowledge diffusion • GPNs and the Host State – Relative bargaining power of firms versus local economies is crucial – Balance between creating the right conditions to attract GPNs and tying oneself too closely to specific GPNs – Problems of dominance of local economy by foreign-based firms – although such firms are to some degree necessary – In such cases non-national goals may become dominant

Value and Employment • Impact of GPNs on Jobs – Local interest is mainly in the effect of GPNs on local jobs • • High-road versus low-road job scenarios Direct versus indirect job creation – Offset jobs created by the number of jobs displaced by adverse effect on local firms: NJ = DJ + IJ − DJ – GPN establishment also involves reorganization of home-country operations – Impacts of offshoring include: export-stimulus effect, home office effect, supporting firm effect and production displacement effect • TNCs and Local Employment – Net employment effect: NE = XE + HE + SE − DE – Quantity of jobs, quality of jobs and location of jobs – Exploitation of cheap labour is one of the major charges levelled at TNCs • TNCs and Local Labour Relations – – Variation exists in degree of TNC HQ’s involvement in labour relations Dispersed nature of TNCs makes it difficult for labour to organize against them Possible counters: global union federations, networks of workers Contracts: firms differentiating between core and non-core workers