Global production networks and the analysis of economic development

TL;DR: In this article, the authors propose a framework for the analysis of economic integration and its relation to the asymmetries of economic and social development, which is more adequate to the exigencies and consequences of globalization than has traditionally been the case in development studies.

Abstract: This article outlines a framework for the analysis of economic integration and its relation to the asymmetries of economic and social development. Consciously breaking with state-centric forms of social science, it argues for a research agenda that is more adequate to the exigencies and consequences of globalization than has traditionally been the case in 'development studies'. Drawing on earlier attempts to analyse the cross-border activities of firms, their spatial configurations and developmental consequences, the article moves beyond these by proposing the framework of the 'global production network' (GPN). It explores the conceptual elements involved in this framework in some detail and then turns to sketch a stylized example of a GPN. The article concludes with a brief indication of the benefits that could be delivered by research informed by GPN analysis.

Summary

KEYWORDS

• Globalization; economic development; business networks; institutions; embeddedness.
• The analysis of economic development has been bedevilled by a series of analytic disjunctions that have resulted in work either at macro or meso levels of abstraction or, where empirical investigations have probed micro level processes, the larger analytic picture has often been absent, merely implicit, or at best weakly developed.
• What is more, from the beginnings of ‘dependency’ approaches to development in the 1940s through to debates over the respective roles of states and markets in the East.

Review of International Political Economy

• Little of it has probed the organizational dynamics of TNC subsidiaries as they emerge, evolve and impact on particular economies and even less of it has dealt with domestic rms, be they associated or not with foreign companies.
• More accurately, perhaps, the world is now constituted by both a space of places and a space of ows and thus a key issue has become the nature of the dialectical relation between these spaces and the consequences of that relation.
• Globalization (for that is the shorthand for their concerns) has undercut the validity of traditional, state-centred, forms of social science, and with that the agendas that hitherto have guided the vast majority of research on economic and social development.
• The authors then outline the conceptual elements of the GPN and, in so doing, highlight the reasons for its analytic superiority over competing frameworks.

CRITICAL REFLECTIONS ON RELATED APPROACHES

• The result is a considerable degree of confusion in the use and meaning of the terminologies employed (cf. Sturgeon, 2001).
• Therefore, carry with them different kind of intellectual ‘baggage’.
• One difference between these approaches is between those that stem from the business-managerial literature and those that have evolved within an economic-developmental framework.
• A second difference is between those that employ a ‘chain’ metaphor and those that adopt a ‘network’ perspective (although the distinction is not always clear-cut).

Chain concepts

• The value chain or value-adding chain is an old-established concept in industrial economics and in the business studies literature.
• For their purposes, Porter’s conceptualization has a limited utility because it is bounded by the rm or interrm network and pays no attention to issues of corporate power, the institutional contexts of – and in uences upon – rm-based activities, or to the territorial arrangements (and their profound economic and social asymmetries) in which the chains are embedded.
• Indeed, there is a plurality of theories underlying recent lière analyses, particularly those of regulation and convention theory.
• By far the most useful of the chain conceptualizations of economic activities is Gary Geref ’s global commodity chain (GCC).
• Third, there have been few attempts to understand the signi cance of rm ownership (domestic or foreign, and in the latter case, by nationality) for economic and social development in particular societies.

Network concepts

• For the study of global production networks, this means that space and distance have to be seen not in absolute, Euclidean terms, but as ‘spatial elds’ and relational scopes of in uence, power and connectivity (Harvey, 1969; Murdoch, 1998).
• Finally, ANT conceptualizes networks as hybrid collectivities of human and non-human agents and thus allows the consideration of the important technological elements that underlie and in uence economic activities.
• Rather than having developed an explanatory category of general relevance, Ernst has tended to highlight only one particular form of industrial organization; and one, at that, which seems to be drawn from a sectorally narrow range.
• First, he criticizes the tendency to focus narrowly on the role of key ‘ agship’ rms within GPNs at the expense of attention to network suppliers that are more than one stage removed from the agship.

GLOBAL PRODUCTION NETWORKS

• The concept of the global production network (GPN) developed in the remainder of this article draws on many aspects of the work outlined in the preceding section.
• Additionally, the chain metaphor – consistent with a commodity discourse – seems to have dif culties incorporating due attention to the issues of the reproduction of labour power etc.
• Speci cally, the terms ‘international’ and ‘transnational’ derive from essentially state-centric discourses.
• How they constitute and are re-constituted by the economic, social and political arrangements of the places they inhabit – is central to an analysis of the prospects for development at the local level.
• Speci c spatial con gurations are an inherent characteristic of all networks; each GPN can be mapped by ‘placing’ its agents and sketching their mutual connections.

Conceptual categories

• There are three principal elements on which the architecture of the GPN framework is raised.
• In all of these cases, the national institutional in uences to which the rms are subject (government agencies, trade unions, employer associations, for instance) may be decisive for the possibilities of value enhancement.
• GPNs do not only connect rms functionally and territorially but also they connect aspects of the social and spatial arrangements in which those rms are embedded and which in uence their strategies and the values, priorities and expectations of managers, workers and communities alike, also known as Embeddedness.
• Firms – be they TNCs or smaller local enterprises – arise from, and continue to be in uenced by, the institutional fabrics and social and cultural contexts of particular forms of capitalism (or in the case of Eastern Europe, China etc. prior to the 1980s, particular forms of state socialism) in their countries of origin.
• Network embeddedness can be regarded as the product of a process of trust building between network agents, which is important for successful and stable relationships.

Conceptual dimensions

• The categories sketched above are ‘energized’ and ‘live’ through a number of conceptual dimensions.
• These constitute the frameworks through which value is created, power exercised or institutional embeddedness etc. given concrete effect in terms of particular initiatives and policies.
• There are four broad dimensions that are of signi cance.

Firms

• Firms, even within the same sector, differ in terms of their strategic priorities, their attitudes to labour relations, the nature of their relations with suppliers etc.
• As a consequence one would expect that while there may be similarities between the ways in which rms in the same sector operate (generate value, exercise their power over suppliers etc.), there will still be important rmspeci c differences, not least in terms of the locations where lead rms decide to invest or establish supplier and subcontractor connections.
• These differences may stem from the nature of ownership (equity arrangements, and/or ‘nationality’), managerial whim or they may derive from values embodied in the rm’s evolution.
• Whatever the source of these differences it is likely that they have implications for the ways in which their GPNs are constructed (if they are lead rms) or for the ways in which they participate (seek to develop and exercise autonomy, for instance) in other rm’s GPNs (if they are suppliers and subcontractors).

Sectors

• While GPNs have characteristics that are rm-speci c, rms that operate in the same sector are likely to create GPNs that have some degree of similarity.
• The reasons for this are that similar technologies, products and market constraints are likely to lead to similar ways of creating competitive advantage and thus broadly similar GPN architectures.
• Thus, for their purposes, a sector need to be de ned by criteria other than mere statistical classi cation.
• Besides being a unique structure of competition and technology, rms in the same economic sector usually share a common ‘language’ and a particular communication structure speci c to that sector (Hess, 1998).
• These sectoral particularities create sectorspeci c regulational environments, were particular issues are addressed by government policies at different scales.

Networks

• It is within the various networks that particular issues of governance arise.
• As a consequence there is likely to be signi cant variation, for instance, in the extent to which secondary rms in a given network are capable of exercising a degree of autonomy that would allow them to move into higher value-added activities with their more positive implications for economic development.

Institutions

• In principle the institutional arrangements impact both locally and globally on the GPNs.26 they can be of considerable importance in the generation of value locally, in its enhancement and in its capture.
• The authors apply this to a stylised example27 in order to underline the potential signi cance of the GPN framework for the analysis of inter-organizational connections, and their relation to economic development in the regions, states and localities affected by the GPN in question.
• The latter shows little or no capacity to capture whatever value that is being created within the region, as can often be the case in pure ‘branch plant’ circumstances.
• The corporate power of some rms over their regional environment, on the other hand, is exempli ed by Region A’s lead rm affecting the local administration, as shown in Figure 2, while collective power is exercised by the labour union.
• The territorial embeddedness of the network under consideration is not immediately educible, but can be represented by the density and intensity of local/regional or national connections between the different agents.

CONCLUSION

• In this article the authors have outlined a conceptual framework for mapping and analysing certain aspects of economic globalization – those related to production and consumption – and their developmental consequences.
• The framework the authors have proposed – that of the global production network – is an explicit attempt to break with state-centric conceptualisations on the one hand and signi cantly extend the analytic and policy utility of cognate formulations on the other.
• The proof of success, however, will depend on whether the GPN framework stimulates research that delivers analyses that are both empirically and theoretically richer than at present.
• More importantly, however, it will depend on whether the framework helps to produce research that contributes more effectively to the task of improving the human condition in the age of economic and geo-political turbulence in which the authors now exist.

Figures

Figure 2 Mapping global production networks – a stylised example

Figure 1 A framework for GPN analysis

Full text

Global production networks and the
analysis of economic development
Jeffrey Henderson, Peter Dicken, Martin Hess,
Neil Coe and Henry Wai-Chung Yeung
University of Manchester and National University of Singapore
A BSTR AC T
This article outlines a framework for the analysis of economic integration
and its relation to the asymmetries of economic and social development.
Consciously breaking with state-centric forms of social science, it argues
for a research agenda that is more adequate to the exigencies and conse-
quences of globalization than has traditionally been the case in ‘devel-
opment studies’. Drawing on earlier attempts to analyse the cross-border
activities of rms, their spatial congurations and developmental conse-
quences, the article moves beyond these by proposing the framework of
the ‘global production network’ (GPN). It explores the conceptual elements
involved in this framework in some detail and then turns to sketch a
stylized example of a GPN. The article concludes with a brief indication
of the benets that could be delivered by research informed by GPN
analysis.
KE YWORD S
Globalization; economic development; business networks; institutions;
embeddedness.
The analysis of economic development has been bedevilled by a series
of analytic disjunctions that have resulted in work either at macro or
meso levels of abstraction or, where empirical investigations have probed
micro level processes, the larger analytic picture has often been absent,
merely implicit, or at best weakly developed. While there are notable
exceptions to this general rule (for instance, Armstrong and McGee, 1985)
behind it lies half a century and more of scholarship in development
economics (irrespective of its paradigmatic stripe) and in the political
economy and sociology of development.
1
What is more, from the begin-
nings of ‘dependency’ approaches to development in the 1940s through
to debates over the respective roles of states and markets in the East
Review of International Political Economy 9:3 August 2002: 436–464
Review of International Political Economy
ISSN 0969-2290 print/ISSN 1466-4526 online © 2002 Taylor & Francis Ltd
http://www.tandf.co.uk
DOI: 10.1080/09692290210150842

Asian ‘miracle’ and its recent demise, the central agent in development
has often been perceived as the state, whether the assessment of its role
has been positive or negative.
2
Although the developmental signicance
of labour, gender and other social movements as well as international
agencies such as the IMF and World Bank, have gured in radical
analyses, the analytic space given to development actors other than these,
has been limited.
Nowhere is this relative absence more obvious than with regard to
the rm. Although there is a long history of work on foreign investment
and development (summarized, for instance, in Jenkins, 1987 and Dicken,
1998), this has tended to deal largely with the role of transnational cor-
porations (TNCs) and has relied primarily on secondary data for its
empirical bases. Little of it has probed the organizational dynamics of
TNC subsidiaries as they emerge, evolve and impact on particular
economies and even less of it has dealt with domestic rms, be they
associated or not with foreign companies.
3
There is, of course, a considerable amount of research on rms that
has been conducted by sociologists of work and organization and by
specialists in management studies. However, this has been largely con-
ned to companies in developed economies and the former state-socialist
societies of Central and Eastern Europe, and where it has been conducted
by management specialists, it has remained outside the social science
mainstream and thus has largely failed to inuence (or be inuenced
by) more general discourses. Where work of this nature has been con-
ducted in the developing world, it has been done largely by feminist
researchers and has tended to engage more with gender-related issues
than with the broader questions of industrial organization and economic
development (see for instance, Heyzer, 1986; Mitter and Rowbotham,
1995).
A further – and given contemporary circumstances, perhaps fatal –
analytic disjuncture is that research on economic development (as with
the vast majority of social science) has been state-centric in its assump-
tions and analyses.
4
While world-systems theory has provided an analytic
framework that promises to move beyond these limitations, it is a frame-
work that has yet to act as a signicant guide to empirical work on
contemporary problems of development. In this context, the national state
continues to be the conventional unit of analysis for the majority of studies
of the world economy. However, exclusive attention to this level of aggre-
gation is becoming les useful in light of the changes occurring in the
organization of economic activities which increasingly tend to slice
through, while still being unevenly contained within, state boundaries.
Indeed, Castells has argued that the world is being transformed from
a ‘space of places’ into a ‘space of ows’ (Castells, 2000a, 2000b). More
accurately, perhaps, the world is now constituted by
both
a space of places
HENDERSON ET AL.: GLOBAL PRODUCTION NETWORKS
437

and
a space of ows and thus a key issue has become the nature of the
dialectical relation between these spaces and the consequences of that
relation.
In order to understand the dynamics of development in a given place,
then, we must comprehend how places are being transformed by ows
of capital, labour, knowledge, power etc. and how, at the same time,
places (or more specically their institutional and social fabrics) are trans-
forming those ows as they locate in place-specic domains. Globaliza-
tion (for that is the shorthand for our concerns) has undercut the valid-
ity of traditional, state-centred, forms of social science, and with that
the agendas that hitherto have guided the vast majority of research on
economic and social development. Investigations adequate to the study
of globalization and its consequences demand of social scientists the
elaboration of analytic frameworks and research programmes that simul-
taneously foreground the dynamics of uneven development transna-
tionally, nationally and sub-nationally. Such investigations require us to
focus on the ows
and
the places
and
their dialectical connections as these
arise and are realized in the developed and developing worlds alike.
Additionally, if the object of our endeavours is the possibilities for econ-
omic development and prosperity, then we should recognize that in order
to speak authoritatively on these issues, we need to study what rms
do, where they do it, why they do it, why they are allowed to do it, and
how they organize the doing of it across different geographic scales.
In this article we outline an analytic framework which, we believe,
helps us to understand some of these processes more effectively. The
framework we propose is that of the ‘global production network’ (GPN).
While the GPN is not advanced as a totalizing framework capable of
grasping the myriad complexities of economic globalization, we believe
that it is capable of delivering a better analytic purchase on the changing
international distribution of production and consumption – and the
viability of different development strategies to which they relate – than
has previously been possible.
We begin with some brief critical reections on the most relevant pre-
cursors to our work. We then outline the conceptual elements of the GPN
and, in so doing, highlight the reasons for its analytic superiority over
competing frameworks. Penultimately we present a stylised example of
a GPN and conclude with a brief comment on the benets that GPN
research could deliver.
CR I TICAL REF LE CTIO NS ON REL ATE D A PP ROACH ES
Over the past 20 years or so, a plethora of studies has emerged using
some variant or another on the concept of chains or networks.
5
The result
is a considerable degree of confusion in the use and meaning of the
REVIEW OF INTERNATIONAL POLITICAL ECONOMY
438

terminologies employed (cf. Sturgeon, 2001). Although the approaches
often overlap with one another they derive from different intellectual
domains and, therefore, carry with them different kind of intellec-
tual ‘baggage’. One difference between these approaches is between those
that stem from the business-managerial literature and those that have
evolved within an economic-developmental framework. A second dif-
ference is between those that employ a ‘chain’ metaphor and those that
adopt a ‘network’ perspective (although the distinction is not always
clear-cut).
Chain concepts
The
value chain
or
value-adding chain
is an old-established concept in indus-
trial economics and in the business studies literature. It has been used
most prominently by Michael Porter (1985, 1990) and has achieved very
wide currency in the management community. Like all uses of the chain
metaphor its value lies in its emphasis on the sequential and inter-
connected structures of economic activities, with each link or element in
the chain adding value to the process (value being dened in terms
of the pay-off to the business rm). For our purposes, Porter’s concep-
tualization has a limited utility because it is bounded by the rm or inter-
rm network and pays no attention to issues of corporate power, the
institutional contexts of – and inuences upon – rm-based activities, or
to the territorial arrangements (and their profound economic and social
asymmetries) in which the chains are embedded. As a consequence, it
has little relevance for the study of economic development.
Of greater importance is the concept of the
lière
, which is dened as
a system of agents producing and distributing goods and services for
the satisfaction of a nal demand. Developed in the 1970s by French
economists in order to achieve a more structured understanding of econ-
omic processes within production and distribution systems (Lenz, 1997:
21), the concept stems from a predominantly empirical tradition, the
main objectives of which are to map commodity ows and to identify
the agents and activities within the
lière
(Raikes
et al
., 2000: 404–5). By
doing so, hierarchical relationships between the agents can be identied,
allowing for a detailed analysis of the dynamics of economic integration
and disintegration.
It is difcult to identify a distinct theoretical core for the
lière
approach.
Indeed, there is a plurality of theories underlying recent
lière
analyses,
particularly those of regulation and convention theory.
6
Although the
lière
approach focuses on agents within the system, as well as on depen-
dency and the distribution of power, it concentrates mainly on two types
of agent – large rms and (national) state institutions – and how their
scope of activity is limited by technological constraints. Hence the
HENDERSON ET AL.: GLOBAL PRODUCTION NETWORKS
439

spectrum of agents in production networks, their role in shaping these
networks and thus inuencing development at different scales, is only
partially dealt with.
By far the most useful of the chain conceptualizations of econ-
omic activities is Gary Geref’s
global commodity chain (GCC)
. The char-
acteristics of the GCC framework have been extensively outlined both
in Geref’s own writings (see, for example, Geref and Korzeniewicz,
1994; Geref, 1995, 1999a) and in appraisals by others (see, for example,
Dicken
et al
., 2001; Czaban and Henderson, 1998; Whitley, 1996) so there
is no need for recuperation here. It is important, however, to understand
the intellectual lineage of Geref’s GCC concept and the extent to which
it may meet our needs.
Geref’s work is set within the (broadly dened) ‘dependency’ tradi-
tion of analysis. In focusing on the dynamics of the global organization
of production, however, it has a particular afnity with the work in the
late 1970s and 1980s on the emergence of a ‘new international division
of labour’ and its economic and socio-spatial consequences (cf. Fröbel
et
al
., 1980; Henderson and Castells, 1987; Henderson, 1989). As with the
work of Fröbel and his colleagues, Geref’s contribution was an explicit
attempt to operationalise some of the world-systems categories for the
empirical study of cross-border, rm-based transactions and their rela-
tion to development (Geref, 1995). Unlike their work, however, it
broke with the static (and now empirically redundant) spatial categories
of the core/semiperiphery/periphery typology and, as such, was better
able to grasp the reality of the ‘new’ forms of industrial organisation
that had become the objects of scholarly attention during the 1980s and
1990s.
For Geref and his collaborators, global commodity chains consist of:
sets of interorganizational networks clustered around one com-
modity or product, linking households, enterprises, and states to
one another within the world-economy. These networks are situa-
tionally specic, socially constructed, and locally integrated, under-
scoring the social embeddedness of economic organization.
(Geref
et al
., 1994: 2)
With the exception of trade unions and other NGOs, this denition
incorporates most of the elements relevant to the organization of rm and
inter-rm networks and their relation to the possibilities for economic
and social development. However, only a few of these elements have been
followed through empirically or analytically by Geref, his collaborators,
or others who have worked in this vein.
7
In particular, the focus has
been overwhelmingly on the
governance
dimension of GCCs and on a bi-
modal distinction between producer-driven and buyer-driven GCCs at
that. This distinction, however, is a crude one and it leads to problems.
REVIEW OF INTERNATIONAL POLITICAL ECONOMY
440

Frequently asked questions

Q1. What are the contributions in "Global production networks and the analysis of economic development" ?

This article outlines a framework for the analysis of economic integration and its relation to the asymmetries of economic and social development. Drawing on earlier attempts to analyse the cross-border activities of Žrms, their spatial conŽgurations and developmental consequences, the article moves beyond these by proposing the framework of the ‘ global production network ’ ( GPN ). It explores the conceptual elements involved in this framework in some detail and then turns to sketch a stylized example of a GPN. The article concludes with a brief indication of the beneŽts that could be delivered by research informed by GPN analysis. 

Q2. What are the future works in "Global production networks and the analysis of economic development" ?

The framework the authors have proposed – that of the global production network – is an explicit attempt to break with state-centric conceptualisations on the one hand and signi cantly extend the analytic and policy utility of cognate formulations on the other. More importantly, however, it will depend on whether the framework helps to produce research that contributes more effectively to the task of improving the human condition in the age of economic and geo-political turbulence in which the authors now exist.