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Industrial upgrading and development in Lesotho’s apparel industry: global value chains, foreign direct investment, and market diversification

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  • Mike Morris
  • Cornelia Staritz

Abstract

Many low-income countries are integrated into apparel global value chains through foreign direct investment (FDI), including Lesotho, which has become the largest Sub-Saharan African apparel exporter to the US under the African Growth and Opportunity Act. More recently, South Africa has emerged as a new apparel export market in Lesotho. The two markets are supplied by different types of FDI firms – affiliates of Taiwanese transnational producers and South African manufacturers – which are part of different value chain variants. The paper assesses the implications for industrial upgrading and development of integration into these two value chain variants in Lesotho, drawing on firm-level and institutional interviews. We show that their different characteristics in terms of investors’ motivation, governance structure, end markets, firm set up and most importantly and causally, ownership and embeddedness have crucial impacts on functional, product and process upgrading, local linkages, and skill development.

Suggested Citation

  • Mike Morris & Cornelia Staritz, 2017. "Industrial upgrading and development in Lesotho’s apparel industry: global value chains, foreign direct investment, and market diversification," Oxford Development Studies, Taylor & Francis Journals, vol. 45(3), pages 303-320, July.
    • Handle: RePEc:taf:oxdevs:v:45:y:2017:i:3:p:303-320
    DOI: 10.1080/13600818.2016.1237624
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    Cited by:

    1. Giovanni Pasquali & Shane Godfrey, 2022. "Governance of Eswatini Apparel Regional Value Chains and the Implications of Covid-19," The European Journal of Development Research, Palgrave Macmillan;European Association of Development Research and Training Institutes (EADI), vol. 34(1), pages 473-502, February.
    2. Hui Wang & Xin Zhong, 2023. "An Empirical Study on the Impact of Chinese OFDI on the Global Value Chain Positions of Countries Along the Belt and Road and Threshold Effects," SAGE Open, , vol. 13(1), pages 21582440231, February.
    3. Andrea Coveri & Elena Paglialunga & Antonello Zanfei, 2023. "Global value chains, functional diversification and within-country inequality: an empirical assessment," Working Papers 2302, University of Urbino Carlo Bo, Department of Economics, Society & Politics - Scientific Committee - L. Stefanini & G. Travaglini, revised 2023.
    4. Elena Paglialunga & Andrea Coveri & Antonello Zanfei, 2020. "Climate change and inequality in a global context. Exploring climate induced disparities and the reaction of economic systems," Working Papers 2003, University of Urbino Carlo Bo, Department of Economics, Society & Politics - Scientific Committee - L. Stefanini & G. Travaglini, revised 2020.
    5. Ding Nan & Pomi Shahbaz & Shamsheer ul Haq & Muhammad Nadeem & Muhammad Imran, 2023. "The Economies’ Ability to Produce Diversified and Complex Goods to Meet the Global Competition: Role of Gross Value Chain, Institutional Quality, and Human Capital," Sustainability, MDPI, vol. 15(8), pages 1-17, April.
    6. Paglialunga, Elena & Coveri, Andrea & Zanfei, Antonello, 2022. "Climate change and within-country inequality: New evidence from a global perspective," World Development, Elsevier, vol. 159(C).
    7. Giovanni Pasquali, 2021. "Labour conditions in regional versus global value chains: Insights from apparel firms in Lesotho and Eswatini," WIDER Working Paper Series wp-2021-145, World Institute for Development Economic Research (UNU-WIDER).
    8. Park-Poaps H, 2018. "The Roles Technological Advancement and Knowledge Transfers in the Global Textiles and Clothing Sector," Current Trends in Fashion Technology & Textile Engineering, Juniper Publishers Inc., vol. 2(1), pages 13-17, January.
    9. Linda Calabrese & Neil Balchin, 2022. "Foreign Investment and Upgrading in the Garment Sector in Africa and Asia," Global Policy, London School of Economics and Political Science, vol. 13(S1), pages 34-44, April.
    10. Rasmus Lema & Roberta Rabellotti & Padmashree Gehl Sampath, 2018. "Innovation Trajectories in Developing Countries: Co-evolution of Global Value Chains and Innovation Systems," The European Journal of Development Research, Palgrave Macmillan;European Association of Development Research and Training Institutes (EADI), vol. 30(3), pages 345-363, July.
    11. Grumiller, Jan, 2019. "A strategic-relational approach to analyzing industrial policy regimes within global production networks: The Ethiopian Leather and Leather Products Sector," Working Papers 60, Austrian Foundation for Development Research (ÖFSE).
    12. Aarti Krishnan, 2023. "Embeddedness beyond the lead firm in global production networks: Insights from Kenyan horticulture," Environment and Planning A, , vol. 55(8), pages 1859-1883, November.
    13. Giovanni Pasquali & Shane Godfrey & Khalid Nadvi, 2021. "Understanding regional value chains through the interaction of public and private governance: Insights from Southern Africa’s apparel sector," Journal of International Business Policy, Palgrave Macmillan, vol. 4(3), pages 368-389, September.
    14. Amrita Saha & André Castro & Marco Carreras & Daniele Guariso, 2020. "Trade, technology, and absorptive capacity: Firm-level evidence across geographical clusters in the Tanzanian textiles and apparel sector," WIDER Working Paper Series wp-2020-96, World Institute for Development Economic Research (UNU-WIDER).
    15. Anthony Black & Lawrence Edwards & Faizel Ismail & Brian Makundi & Mike Morris, 2019. "Spreading the gains?: Prospects and policies for the development of regional value chains in Southern Africa," WIDER Working Paper Series wp-2019-48, World Institute for Development Economic Research (UNU-WIDER).
    16. Yoshimichi Murakami & Keijiro Otsuka, 2020. "Governance, Information Spillovers, and Productivity of Local Firms: Toward an Integrated Approach to Foreign Direct Investment and Global Value Chains," The Developing Economies, Institute of Developing Economies, vol. 58(2), pages 134-174, June.

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