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Journal of Business Ethics

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23-09-2014

Economic and Social Upgrading in Global Value Chains and Industrial Clusters: Why Governance Matters

Authors: Gary Gereffi, Joonkoo Lee

Published in: Journal of Business Ethics | Issue 1/2016

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Abstract

The burgeoning literature on global value chains (GVCs) has recast our understanding of how industrial clusters are shaped by their ties to the international economy, but within this context, the role played by corporate social responsibility (CSR) continues to evolve. New research in the past decade allows us to better understand how CSR is linked to industrial clusters and GVCs. With geographic production and trade patterns in many industries becoming concentrated in the global South, lead firms in GVCs have been under growing pressure to link economic and social upgrading in more integrated forms of CSR. This is leading to a confluence of “private governance” (corporate codes of conduct and monitoring), “social governance” (civil society pressure on business from labor organizations and non-governmental organizations), and “public governance” (government policies to support gains by labor groups and environmental activists). This new form of “synergistic governance” is illustrated with evidence from recent studies of GVCs and industrial clusters, as well as advances in theorizing about new patterns of governance in GVCs and clusters.

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There is an extensive discussion in the GVC literature that we review below about different ways to measure economic upgrading that involve a focus on both higher value products (e.g., product upgrading, often measured with unit values of exports) and various ways of contributing to higher value-added production, including greater levels of domestic content in exports.

“Capturing the Gains” was funded by the UK’s Department for International Development (DFID) between 2010 and 2013, and the project’s publications, working papers, policy briefs, and other activities are listed on the Capturing the Gains website, http://www.capturingthegains.org/.

This normative dimension is particularly important in place-based industrial clusters, where underlying phenomena like the communitarian ethos, a distinctive trait of the Marshallian industrial districts, facilitate mutual trust between people and the transfer and co-production of knowledge (De Marchi and Grandinetti 2014).

This may be emerging not only in the Bangladesh garment industry, with its unprecedented multi-stakeholder coalition of global retailers and brands that have pressured both the Bangladesh government and local factory owners to change legislation and business practices that have led to dangerous and degrading workplace conditions, but also in manufacturing powerhouses like China, where synergistic governance also forced changes by Foxconn and Apple in the electronics sector (Mayer 2014).

Social upgrading can be subdivided into two components (Barrientos and Smith 2007; Elliott and Freeman 2003): measurable standards, which include the type of employment (regular or irregular), wage level, social protection, and working hours; and enabling rights, or less quantifiable aspects of social upgrading, such as freedom of association, the right to collective bargaining, non-discrimination, voice, and empowerment.

While not directly addressed in this article, we view environmental upgrading as an important corollary of economic and social upgrading in the expanded GVC research agenda we discuss here.

See more on the Better Work program at its website (http://betterwork.org/global).

In one such example in Brazil, labor inspectors not only enforced the labor law but also actively engaged in devising local arrangements such as employers’ consortia and prompted producers to make their work practices safer (Coslovsky 2014, p. 210). Similarly, labor inspectors in the Dominican Republic, in addition to their conventional role of law enforcement, took a proactive approach to labor regulation and engaged in educating workers about their rights and reconciling disputes between employers and workers (Amengual 2010).

As Coslovsky and Locke (2013) point out, such complementarity may not require explicit communication and coordination between private and public governance actors to make each other’s actors effective (see also Amengual 2010).

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Title: Economic and Social Upgrading in Global Value Chains and Industrial Clusters: Why Governance Matters
Authors: Gary Gereffi
Joonkoo Lee
Publication date: 23-09-2014
Publisher: Springer Netherlands
Published in: Journal of Business Ethics / Issue 1/2016
Print ISSN: 0167-4544
Electronic ISSN: 1573-0697
DOI: https://doi.org/10.1007/s10551-014-2373-7

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