2. A Review of “Whither Global Production Networks in Economic Geography” By Hess, Martin and Yeung, Henry A Review of “Global Production Networks and the Changing Geography of Innovation Systems. Implications for Developing Countries” By Ernst, Dieter
3. Overview Structures in which to study global production systems National to international innovation systems Mobility and diffusion of knowledge Implications for developing countries Conclusions
4. Structures in which to study Global Production Systems How to study global production networks? How to explain spatially uneven development in capitalist economies?
6. National to international innovation systems National Innovation Systems – the institutional determinants of learning, knowledge creation, and innovation Assumptions: Innovation is essential for growth and welfare Want to gain as a nation
7. National to international innovation systems National vs. International linkages National: Nation contains a unique economic structure Determines its specialization Determines its path of innovation Determines its linkages (both national and international)
8. National to international innovation systems National vs. International linkages International linkages of the host economy Suppliers to multi-national firms Licensed partners
9. National to international innovation systems National vs. International linkages Problem is that developing countries often lack linkages in their own country So international linkages fill in the gaps R&D Production Supply
11. Mobility and diffusion of knowledge Knowledge and innovation tend to move slower than production or financial flows Tacit knowledge – slow Implicit knowledge – fast Desire to keep information to sustain competitive advantages Synergy created from geographic clustering
12. Mobility and diffusion of knowledge How then does knowledge and innovation move? Unlike production, knowledge moves and concentrates in specific clusters (semi conductor industry) Standardized production and implicit knowledge High end production and tacit knowledge
15. Mobility and diffusion of knowledge Advantages of location are important in determining knowledge flows Product Life Cycle Short – suppliers and assemblers need to locate near one another Implication: advantages of clustering – (spillovers, efficiency…) Long – no need for co location Implication: more even geographic dispersion (take advantage of cheap labor etc…)
16. Mobility and diffusion of knowledge Extension of these advantages Through time the knowledge flows through the GPN Low end producers gain knowledge and produce higher end products while outsourcing the lower end products (thus further extending the chain and moving up it themselves) Solectron This is one way developing countries increase knowledge
17. Mobility and diffusion of knowledge Disadvantages of location are important in determining knowledge flows (when the chain grows spatially) General: Delivery and distribution Communication Demand fluctuation International: Political Managerial Inferior processes Exchange rate fluctuations
24. Implications for developing countries Integration of developing countries into global production networks Help the country– diffusion of knowledge Hurt the country – erode competitive advantages
25. Implications for developing countries Knowledge Diffusion into a Developing Country Parent Company Knowledge Flow
26. Implications for developing countries Knowledge Diffusion into a Developing Country Parent Company Knowledge Flow
27. Implications for developing countries Industrial upgrading – shifting to higher value added products and production stages through increasing specialization. -Ernst 2001 Assumptions: Knowledge Innovation
28. Implications for developing countries Specialization Inter-industry Inter-factorial Demand upgrade Functions upgrade Identify links between innovation Linkages specializations Sustained Growth
30. Implications for developing countries Policy Roles for Government concerning integration of GPN’s Globalization makes governments enact policies Investment policies Trade policies Targeted industrial development to take advantage of specializations and competitive advantages Not to do so would be detrimental vulnerability to MNC’s international financial fluctuations
31. Implications for developing countries Interesting Theory: Intellectual property rights Should developing countries encourage the diffusion of intellectual property? (i.e. weak property rights?) Then gradually increase protection as knowledge increases?
32. Conclusions Global Production Networks and Developing Countries Absorption of foreign ideas and knowledge Reduce risk through diversification Increase in knowledge leads to increase in innovation which leads to sustained growth
