Climbing Up Global Value Chains: Leveraging FDI for economic development

June 2022

Climbing up global value chains

The fragmentation of production offers new opportunities to economies seeking to take part in global value chains (GVCs). With the help of foreign direct investment (FDI), some economies are shifting their GVC participation to an increasing number of higher value-added tasks.

Bangalore - one of the world's fastest growing regions - owes its success in part to policies that are sensitive to international developments and GVCs, and makes the most of dynamic specialization and foreign direct investment. GVCs and FDI created an ecosystem that enabled the region's economic ‘upgrading’.

Following Bangalore’s precedence, the reconfiguration of FDI networks and GVCs is promising for other cities and regions across Asia. This report sets out to build a wider evidence base for tackling the opportunities and challenges related to this reconfiguration.

By offering a critical review of existing scholarly and policy literature on GVCs and upgrading in Asia, this report presents the nature and evolution of GVCs, and their link to FDI and economic development. It also uncovers the role of different types of firms and regions.

Second, the report unveils the heterogeneous subnational geography of GVC functions and the links between GVC indicators and regional indicators based on FDI.

Lastly, in light of the conceptual and empirical gaps identified in the qualitative and quantitative discussions, the report sketches a policy framework designed to guide and orientate debates and public policies in Asia.

Client: Hinrich Foundation

Authors: Riccardo Crescenzi and Oliver Harman

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