IDEAS home Printed from https://ideas.repec.org/a/kap/jincot/v15y2015i1p69-85.html
   My bibliography  Save this article

Slicing Up Global Value Chains: a Micro View

Author

Listed:
  • Jyrki Ali-Yrkkö
  • Petri Rouvinen

Abstract

Global value chains, GVCs, have had a transformative impact on the world economy since the early 1990s. We study 45 specific GVCs with company-confidential invoice-level data. We find that the case companies’ headquartering functions capture a large share of the overall value added, 27 % on average. The value added shares of other functions are as follows: distribution 21 %, final assembly 16 %, and logistics 5 %. The remaining 30 % of the value added goes to vendors. Upon considering value added by country, we find that the home economy’s share is 47 % on average. This share is reduced with offshored—as opposed to Finnish—final assembly: 2 percentage points for a high-end smartphone, over ten percentage points for a low-end feature phone, and 27 percentage points for machinery and metal products. We attribute the latter large drop to co-location of non-assembly functions, intellectual property issues, transfer pricing, and profit allocation. We conclude that GVCs are complex and heterogeneous; value chains of basic products and services are not nearly as global as those of advanced ones; and the value added share of wholesaling and retail is large in consumer products. We nevertheless argue that value added is less tied to assembly—and other tangible aspects of GVCs—than conventional wisdom suggests; the intangible aspects—market and internal services, and creation and appropriation of intellectual property—are more important. The increasing presence of GVCs brings about several thorny policy issues that are yet to be addressed. Copyright The Author(s) 2015

Suggested Citation

  • Jyrki Ali-Yrkkö & Petri Rouvinen, 2015. "Slicing Up Global Value Chains: a Micro View," Journal of Industry, Competition and Trade, Springer, vol. 15(1), pages 69-85, March.
    • Handle: RePEc:kap:jincot:v:15:y:2015:i:1:p:69-85
    DOI: 10.1007/s10842-014-0192-2
    as

    Download full text from publisher

    File URL: http://hdl.handle.net/10.1007/s10842-014-0192-2
    Download Restriction: Access to full text is restricted to subscribers.
    File URL: https://libkey.io/10.1007/s10842-014-0192-2?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Kalm, Matias & Seppälä, Timo & Ali-Yrkkö, Jyrki, 2014. "Who Captures Value in Digital Services?," ETLA Brief 27, The Research Institute of the Finnish Economy.
    2. Olivier Cattaneo & Gary Gereffi & Cornelia Staritz, 2010. "Global Value Chains in a Postcrisis World : A Development Perspective," World Bank Publications - Books, The World Bank Group, number 2509.
    3. Philippe Aghion & Peter Howitt, 2009. "The Economics of Growth," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262012634, December.
    4. Philippe Aghion & Diego Comin & Peter Howitt & Isabel Tecu, 2016. "When Does Domestic Savings Matter for Economic Growth?," IMF Economic Review, Palgrave Macmillan;International Monetary Fund, vol. 64(3), pages 381-407, August.
    5. Gene M. Grossman & Esteban Rossi-Hansberg, 2008. "Trading Tasks: A Simple Theory of Offshoring," American Economic Review, American Economic Association, vol. 98(5), pages 1978-1997, December.
    6. Jeffrey Neilson & Bill Pritchard & Henry Wai-chung Yeung, 2014. "Global value chains and global production networks in the changing international political economy: An introduction," Review of International Political Economy, Taylor & Francis Journals, vol. 21(1), pages 1-8, February.
    7. De Backer, Koen & Miroudot, Sébastien, 2014. "Mapping global value chains," Libros de la CEPAL, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL), number 37176.
    8. Jyrki Ali-Yrkkö & Petri Rouvinen & Timo Seppälä & Pekka Ylä-Anttila, 2011. "Who Captures Value in Global Supply Chains? Case Nokia N95 Smartphone," Journal of Industry, Competition and Trade, Springer, vol. 11(3), pages 263-278, September.
    9. Jason Dedrick & Kenneth L. Kraemer & Greg Linden, 2010. "Who profits from innovation in global value chains? A study of the iPod and notebook PCs," Industrial and Corporate Change, Oxford University Press and the Associazione ICC, vol. 19(1), pages 81-116, February.
    10. Erik Dietzenbacher & Bart Los & Robert Stehrer & Marcel Timmer & Gaaitzen de Vries, 2013. "The Construction Of World Input-Output Tables In The Wiod Project," Economic Systems Research, Taylor & Francis Journals, vol. 25(1), pages 71-98, March.
    11. Marcel P. Timmer & Abdul Azeez Erumban & Bart Los & Robert Stehrer & Gaaitzen J. de Vries, 2014. "Slicing Up Global Value Chains," Journal of Economic Perspectives, American Economic Association, vol. 28(2), pages 99-118, Spring.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Juhász, Péter & Boda, György & Stocker, Miklós & Matyusz, Zsolt, 2021. "A fenntartható gazdasági növekedés és a tudástőke [Sustainable economic growth and knowledge capital]," Közgazdasági Szemle (Economic Review - monthly of the Hungarian Academy of Sciences), Közgazdasági Szemle Alapítvány (Economic Review Foundation), vol. 0(S11), pages 2-35.
    2. Gaétan de Rassenfosse & Russell Thomson, 2019. "R&D offshoring and home industry productivity," Industrial and Corporate Change, Oxford University Press and the Associazione ICC, vol. 28(6), pages 1497-1513.
    3. Pelli, Päivi, 2018. "Services and industrial development: analysis of industrial policy, trends and issues for the forest-based sector," Journal of Forest Economics, Elsevier, vol. 31(C), pages 17-26.
    4. Ylömäki, Tobias, 2016. "Global Value Chain Upgrading," ETLA Working Papers 36, The Research Institute of the Finnish Economy.
    5. Andrea Coveri & Antonello Zanfei, 2023. "The virtues and limits of specialization in global value chains: analysis and policy implications," Economia e Politica Industriale: Journal of Industrial and Business Economics, Springer;Associazione Amici di Economia e Politica Industriale, vol. 50(1), pages 73-90, March.
    6. Yasmine Eissa & Chahir Zaki, 2023. "On GVC and innovation: the moderating role of policy," Economia e Politica Industriale: Journal of Industrial and Business Economics, Springer;Associazione Amici di Economia e Politica Industriale, vol. 50(1), pages 49-71, March.
    7. Marcel Timmer, 2017. "Productivity Measurement in Global Value Chains," International Productivity Monitor, Centre for the Study of Living Standards, vol. 33, pages 182-193, Fall.
    8. Ali-Yrkkö, Jyrki & Heikkilä, Jussi & Lööf, Hans & Martinsuo, Miia & Mohammadi, Ali & Olhager, Jan & Pajarinen, Mika & Rouvinen, Petri & Tuhkuri, Joonas, . "International Sourcing in Finland and Sweden," ETLA B, The Research Institute of the Finnish Economy, number 275, June.
    9. Gábor Márk Pellényi, 2020. "The Role of Central and Eastern Europe in Global Value Chains: Evidence from Occupation-Level Employment Data," European Economy - Economic Briefs 062, Directorate General Economic and Financial Affairs (DG ECFIN), European Commission.
    10. Enderwick, Peter, 2018. "The scope of corporate social responsibility in networked multinational enterprises," International Business Review, Elsevier, vol. 27(2), pages 410-417.
    11. Ali-Yrkkö, Jyrki & Mattila, Juri & Seppälä, Timo, 2017. "Estonia in Global Value Chains," ETLA Reports 69, The Research Institute of the Finnish Economy.
    12. Finér, Lauri & Ylönen, Matti, 2017. "Tax-driven wealth chains: A multiple case study of tax avoidance in the finnish mining sector," CRITICAL PERSPECTIVES ON ACCOUNTING, Elsevier, vol. 48(C), pages 53-81.
    13. Muradov, Kirill, 2016. "Trade costs and borders in the world of global value chains," Conference papers 332697, Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project.
    14. Tsakanikas, Aggelos & Roth, Felix & Caliò, Simone & Caloghirou, Yannis & Dimas, Petros, 2020. "The contribution of intangible inputs and participation in global value chains to productivity performance – Evidence from the EU-28, 2000-2014," Hamburg Discussion Papers in International Economics 5, University of Hamburg, Department of Economics.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Ali-Yrkkö, Jyrki & Heikkilä, Jussi & Lööf, Hans & Martinsuo, Miia & Mohammadi, Ali & Olhager, Jan & Pajarinen, Mika & Rouvinen, Petri & Tuhkuri, Joonas, . "International Sourcing in Finland and Sweden," ETLA B, The Research Institute of the Finnish Economy, number 275, June.
    2. Bart Los & Marcel P. Timmer & Gaaitzen J. Vries, 2015. "How Global Are Global Value Chains? A New Approach To Measure International Fragmentation," Journal of Regional Science, Wiley Blackwell, vol. 55(1), pages 66-92, January.
    3. Chiara Bentivogli & Tommaso Ferraresi & Paola Monti & Renato Paniccià & Stefano Rosignoli, 2019. "Italian Regions in Global Value Chains: An Input-Output Approach," Politica economica, Società editrice il Mulino, issue 1, pages 55-94.
    4. McWilliam, Sarah E. & Kim, Jung Kwan & Mudambi, Ram & Nielsen, Bo Bernhard, 2020. "Global value chain governance: Intersections with international business," Journal of World Business, Elsevier, vol. 55(4).
    5. João Amador & Sónia Cabral, 2014. "Global Value Chains: Surveying Drivers, Measures and Impacts," Working Papers w201403, Banco de Portugal, Economics and Research Department.
    6. Wen Chen & Reitze Gouma & Bart Los & Marcel P. Timmer, 2017. "Measuring the income to intangibles in goods production: a global value chain approach," WIPO Economic Research Working Papers 36, World Intellectual Property Organization - Economics and Statistics Division.
    7. Marcel P. Timmer & Erik Dietzenbacher & Bart Los & Robert Stehrer & Gaaitzen J. Vries, 2015. "An Illustrated User Guide to the World Input–Output Database: the Case of Global Automotive Production," Review of International Economics, Wiley Blackwell, vol. 23(3), pages 575-605, August.
    8. Martin Borowiecki & Bernhard Dachs & Doris Hanzl-Weiss & Steffen Kinkel & Johannes Pöschl & Magdolna Sass & Thomas Christian Schmall & Robert Stehrer & Andrea Szalavetz, 2012. "Global Value Chains and the EU Industry," wiiw Research Reports 383, The Vienna Institute for International Economic Studies, wiiw.
    9. Andrea Coveri & Antonello Zanfei, 2023. "The virtues and limits of specialization in global value chains: analysis and policy implications," Economia e Politica Industriale: Journal of Industrial and Business Economics, Springer;Associazione Amici di Economia e Politica Industriale, vol. 50(1), pages 73-90, March.
    10. Zhen Zhu & Michelangelo Puliga & Federica Cerina & Alessandro Chessa & Massimo Riccaboni, 2015. "Global Value Trees," PLOS ONE, Public Library of Science, vol. 10(5), pages 1-17, May.
    11. Faye Duchin & Stephen Levine, 2015. "Rents in the era of resource scarcity: global payment flows under alternative scenarios," Journal of Economic Structures, Springer;Pan-Pacific Association of Input-Output Studies (PAPAIOS), vol. 4(1), pages 1-17, December.
    12. Pao‐Li Chang & Phuong T. B. Nguyen, 2022. "Global value chains and the CPTPP," The World Economy, Wiley Blackwell, vol. 45(12), pages 3780-3832, December.
    13. Nenci, Silvia & Fusacchia, Ilaria & Giunta, Anna & Montalbano, Pierluigi & Pietrobelli, Carlo, 2022. "Mapping global value chain participation and positioning in agriculture and food: stylised facts, empirical evidence and critical issues," Bio-based and Applied Economics Journal, Italian Association of Agricultural and Applied Economics (AIEAA), vol. 11(2), July.
    14. Katharina Längle, 2020. "Offshoring: What Consequences for Workers? Evidence from Global Value Chains," Working Papers hal-02548691, HAL.
    15. Lorenzo Cresti & Maria Enrica Virgillito, 2023. "Weak sectors and weak ties? Labour dependence and asymmetric positioning in GVCs," LEM Papers Series 2023/10, Laboratory of Economics and Management (LEM), Sant'Anna School of Advanced Studies, Pisa, Italy.
    16. Hübler, Michael, 2016. "A new trade network theory: What economists can learn from engineers," Economic Modelling, Elsevier, vol. 55(C), pages 115-126.
    17. Peter J. Buckley & Roger Strange & Marcel P. Timmer & Gaaitzen J. de Vries, 2020. "Catching-up in the global factory: Analysis and policy implications," Journal of International Business Policy, Palgrave Macmillan, vol. 3(2), pages 79-106, June.
    18. Philipp Harms & Jaewon Jung & Oliver Lorz, 2021. "Offshoring and sequential production chains: A general equilibrium analysis," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 54(2), pages 623-647, May.
    19. Marcel P Timmer & Sébastien Miroudot & Gaaitzen J de Vries, 2019. "Functional specialisation in trade," Journal of Economic Geography, Oxford University Press, vol. 19(1), pages 1-30.
    20. Bo Meng & Ming Ye & Shang‐Jin Wei, 2020. "Measuring Smile Curves in Global Value Chains," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 82(5), pages 988-1016, October.

    More about this item

    Keywords

    Global value chains; Case studies; Finland; Transfer pricing; Economic policy; D23; F23; L14; M11;
    All these keywords.

    JEL classification:

    • D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation
    • M11 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - Production Management

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:kap:jincot:v:15:y:2015:i:1:p:69-85. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Sonal Shukla or Springer Nature Abstracting and Indexing (email available below). General contact details of provider: http://springer.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.