Transcript KNOWLEDGE TRANSFER AND GLOBAL VALUE CHAINS (GVCs) Koen De Backer, OECD Working Group on Trade and Technology Transfer WTO, Geneva, 29 June 2012

KNOWLEDGE TRANSFER AND
GLOBAL VALUE CHAINS (GVCs)
Koen De Backer, OECD
Working Group on Trade and Technology Transfer
WTO, Geneva, 29 June 2012
Outline of the talk
• What are we talking about:
• knowledge transfer: market transactions and externalities
• GVCs?, Offshoring? Outsourcing?...
• GVCs and knowledge transfer
• Trade of intermediates
• Offshoring: buyer – supplier relationships
• Upgrading within GVCs
• R&D offshoring
Knowledge transfer (1)
• Market transactions: intended transfer
– International trade
– Foreign direct investment
– Licensing
• OECD Database on Technology Balance of Payments
• Royalty payments for patents, licenses and copyrights
– International mobility of personnel
3
International flows of technology,
1999 and 2009
4
Source: OECD (2011)
Royalties and license fees, 1997-2009
5
Source: OECD (2011)
Knowledge transfer (2)
• Externalities: unintended transfer
– International trade
– Foreign direct investment
•
•
•
•
Movement of staff from MNEs to domestic firms
Demonstration effects by MNEs
Increased competition from MNEs
Vertical linkages: upstream and downstream
– Departure of employees
– Patent applications
6
GVCs and offshoring/outsourcing
… gives rise to Global Value Chains
• International production networks; dispersion of production
stages across countries
• Networks of activities, firms (MNEs and local firms),
industries and countries
• More specialisation and complex production relationships,
profound changes in countries’ competitiveness
• Global flows of goods (final and inputs), services, capital,
people, technology…
• Hence, different potential channels of knowledge transfer
(intended and unintended)
Intermediate goods trade within GVCs
– Type of good important for spillovers
– Capital and intermediate goods embody transfer of
technology (less so for consumption goods)
– Empirical evidence (e.g. for Indonesia and India)
on beneficial impact of reduction in tariff barriers
• Larger effects for intermediate goods than for final goods
• Lower prices, larger sales, more variety (i.e. technology),
higher quality final goods
9
Offshoring: buyer – supplier (1)
Market
Chain
Value
End Use
Modular
Relational
Lead
Firm
Lead
Firm
Price
Full-package
Supplier
Relational
Turn-key
Supplier
Supplier
Suppliers
Component
and Material
Suppliers
Component
and Material
Suppliers
Customers
Materials
Low
Captive
Lead
Firm
Hierarchy
Integrated
Firm
Captive
Suppliers
Degree of Explicit Coordination
High
Degree of Power Asymmetry
Source: Gereffi et al. (2010)
10
Offshoring: buyer – supplier (2)
Complexity of
transactions
Ability to codify
transactions
Capabilities in the
supply-base
Governance
Type
Market
Low
High
High
Modular
High
High
High
Relational
High
Low
High
Captive
High
High
Low
Hierarchy
High
Low
Low
DIFFERENT LEARNING PATTERNS
- knowledge properties
- suppliers competence
- lead firm strategies
11
Source: Gereffi et al.
Offshoring: buyer – supplier (3)
Market
Chain
Value
End Use
Modular
Relational
Lead
Firm
Lead
Firm
Price
Full-package
Supplier
Relational
Turn-key
Supplier
Supplier
Suppliers
Component
and Material
Suppliers
Component
and Material
Suppliers
Customers
Materials
Low
Captive
Lead
Firm
Integrated
Firm
Captive
Suppliers
Degree of Explicit Coordination
Degree of Power Asymmetry
Knowledge spillovers
Imitation
Hierarchy
High
- shoes in Brazil
- knitwear in India
12
Offshoring: buyer – supplier (4)
Market
Chain
Value
End Use
Modular
Relational
Lead
Firm
Lead
Firm
Price
Full-package
Supplier
Relational
Turn-key
Supplier
Supplier
Suppliers
Component
and Material
Suppliers
Component
and Material
Suppliers
Customers
Materials
Low
Captive
Lead
Firm
Integrated
Firm
Captive
Suppliers
Degree of Explicit Coordination
Degree of Power Asymmetry
Hierarchy
High
Imitation
Transfer of people
Training by MNE
Knowledge spillovers
13
Offshoring: buyer – supplier (5)
Market
Chain
Value
End Use
Modular
Relational
Lead
Firm
Lead
Firm
Price
Full-package
Supplier
Relational
Turn-key
Supplier
Supplier
Suppliers
Component
and Material
Suppliers
Component
and Material
Suppliers
Customers
Materials
Low
Captive
Lead
Firm
Hierarchy
Integrated
Firm
Captive
Suppliers
Degree of Explicit Coordination
Degree of Power Asymmetry
- (sport) shoes in Brazil
Knowledge transfer from
lead firm
Confined to narrow range
of tasks
High
14
Offshoring: buyer – supplier (6)
Market
Chain
Value
End Use
Modular
Relational
Lead
Firm
Lead
Firm
Price
Full-package
Supplier
Relational
Turn-key
Supplier
Supplier
Suppliers
Component
and Material
Suppliers
Component
and Material
Suppliers
Customers
Materials
Low
Captive
Lead
Firm
International standards
Transfer of knowledge in codes,
technical definitions…
Integrated
Firm
Captive
Suppliers
Degree of Explicit Coordination
Degree of Power Asymmetry
Hierarchy
High
- Automotive in Brazil,
Argentina and Mexico
15
Offshoring: buyer – supplier (7)
Market
Chain
Value
End Use
Modular
Relational
Lead
Firm
Lead
Firm
Price
Full-package
Supplier
Relational
Turn-key
Supplier
Supplier
Suppliers
Component
and Material
Suppliers
Component
and Material
Suppliers
Customers
Materials
Low
Captive
Hierarchy
Integrated
Firm
Lead
Firm
Captive
Suppliers
Degree of Explicit Coordination
Degree of Power Asymmetry
Mutual learning
Face to face interactions
High
- Apparel in East Asia
- computer in Taiwan
16
Dynamics: upgrading within GVCs (1)
Product upgrading
• better quality
• more features
• improved design
Process upgrading
• increase scale and speed
• improve efficiency and productivity (e.g., lean production)
• Introduce new technology
Functional upgrading
• acquiring new functions (or abandoning existing ones) to
increase the overall skill content of the activities.
Chain upgrading
• Moving to another chain
17
Source: Kaplinsky and Morris (2002)
Dynamics: upgrading within GVCs (2)
Type of Upgrading
Chain Upgrading
Relevant Intangible Capital
Dynamic Capability (Teece et al., 1997),
Flexible organizational structure
Firm-specificity
Replicability
Value-added
High
Low
High
Low
High
Low
Functional Upgrading Recognized Brand and reputation,
Sophisticated R&D and design function (facility and
human capital),
High marketing ability (pocession of valuable information
including original database)
Product Upgrading
State-of-the-art core technology (sometime embodied in
human capital),
Effective quality management system,
Innovative technology and design
Process Upgrading
High manufacturing skill
Efficient procurement network,
Advanced skill in process management and line design,
Computerized information (software)
18
Source: OECD (2012)
Dynamics: upgrading within GVCs (2)
Lenovo, Embraer, Tata
Type of Upgrading
Chain Upgrading
Relevant Intangible Capital
…. But…
Dynamic Capability (Teece et al., 1997),
Computer
Flexible organizational structure
Firm-specificity
Replicability
Value-added
High
Low
High
Low
High
Low
comanies in Chinese Taipei
(key suppliers to OEM to OBM?)
Functional Upgrading Recognized Brand and reputation,
Sophisticated R&D and design function (facility and
human capital),
High marketing ability (pocession of valuable information
including original database)
Product Upgrading
State-of-the-art core technology (sometime embodied in
human capital),
Effective quality management system,
Innovative technology and design
Process Upgrading
High manufacturing skill
Efficient procurement network,
Advanced skill in process management and line design,
Computerized information (software)
19
Source: OECD (2012)
Dynamics: upgrading within GVCs (2)
Type of Upgrading
Chain Upgrading
Relational GVCs
Firm-specificity
Modular GVCs
Relevant Intangible Capital
Dynamic Capability (Teece et al., 1997),
Flexible organizational structure
Replicability
Value-added
High
Low
High
Low
High
Low
Functional Upgrading Recognized Brand and reputation,
Sophisticated R&D and design function (facility and
human capital),
High marketing ability (pocession of valuable information
including original database)
Product Upgrading
State-of-the-art core technology (sometime embodied in
human capital),
Effective quality management system,
Innovative technology and design
Process Upgrading
High manufacturing skill
Efficient procurement network,
Advanced skill in process management and line design,
Computerized information (software)
20
Hierarchy
Captive GVCs
Source: OECD (2012)
R&D offshoring (1)
Share of various corporate functions undertaken abroad, 2008 and 2011
21
Source: OECD (2011)
R&D offshoring (2)
Most attractive foreign R&D locations (% of responses)
22
Source: OECD (2011)
R&D offshoring (2)
Reasons to locate research in a particular location
Proximity to local universities and research parks
Tapping informal networks
Proximity to centres of innovation
Limited domestic science base
Access to local specialists/recruiting
Sharing risk among research units
Support of local development projects
Adhering to local regulations
Local patenting issues
Subsidies
Low acceptance of research in home country
Reasons to locate development in a particular
location
Local market requirements
Local support for global customers
Customer proximity and lead users
Co-operation with local partners
Market access
Local citizen image
Simultaneous product launch
Use of different time zones
Country-specific cost advantages
Facilitate manufacturing scale-up
Process innovation and adaptation to local production
National protection
 Source: Von Zedtwitz and Gassmann (2002).
ASSET BASE EXPLOITING
HOME BASE EXPLOITING
BI-DIRECTIONAL FLOWS
UNI-DIRECTIONAL FLOWS
23
Source: OECD (2011)
Conclusions – policy issues (1)
• GVCs strengthen ‘traditional’ channels of technology
transfer…
• And promote new channels (offshoring, including of R&D)
• The size and direction of knowledge transfer depends on:
• The characteristics of knowledge
• The capabilities of local firms and environments
• The strategies of lead firms
• Likewise the opportunities for upgrading are heaviliy
determined by the same factors
Conclusions – policy issues (2)
• Knowledge transfer and learning not automatically;
investments in knowledge capital needed by receiving
partners (absorptive capacity)
• Host countries can play a role in increasing absorptive
capacity of domestic suppliers
• Host countries should play a major role in facilitating
knowledge transfer
Koen De Backer, OECD
[email protected]