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Slicing Up Global Value Chains: a Micro View

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  • 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
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    1. 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.
    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. 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.
    4. 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.
    5. 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.
    6. Enderwick, Peter, 2018. "The scope of corporate social responsibility in networked multinational enterprises," International Business Review, Elsevier, vol. 27(2), pages 410-417.
    7. Ali-Yrkkö, Jyrki & Mattila, Juri & Seppälä, Timo, 2017. "Estonia in Global Value Chains," ETLA Reports 69, The Research Institute of the Finnish Economy.
    8. 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.
    9. 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.
    10. 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.
    11. 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.
    12. Ylömäki, Tobias, 2016. "Global Value Chain Upgrading," ETLA Working Papers 36, The Research Institute of the Finnish Economy.
    13. 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.
    14. 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.

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    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

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