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Upgrading and Value Capture in Global Value Chains in Hungary: More Complex than What the Smile Curve Suggests

In: Foreign Direct Investment in Central and Eastern Europe

Author

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  • Andrea Szalavetz

    (Centre of Economic and Regional Studies of the Hungarian Academy of Sciences (MTA KRTK))

Abstract

This chapter presents a conceptual model to explain why the upgrading of MNCs’ manufacturing subsidiaries fails to translate into additional value capture for upgraded actors. The model, a dynamic version of Mudambi’s (J Econ Geogr 8(5): 699–725, 2008) smile curve, integrates the concept of value capture. It is shown that over time, the shape of the original smile curve transforms. The curve shifts downwards, which represents the shrinking margins of actors. This effect can be countered through upgrading. The bottom part of the curve becomes flatter: this represents the commoditisation of business functions undertaken by upgraded subsidiaries. The sides become steeper as a result of changes in the specialisation of actors at the sides of the curve. The smile is transformed into a “bathtub.”

Suggested Citation

  • Andrea Szalavetz, 2017. "Upgrading and Value Capture in Global Value Chains in Hungary: More Complex than What the Smile Curve Suggests," Studies in Economic Transition, in: Balázs Szent-Iványi (ed.), Foreign Direct Investment in Central and Eastern Europe, chapter 6, pages 127-150, Palgrave Macmillan.
    • Handle: RePEc:pal:stuchp:978-3-319-40496-7_6
    DOI: 10.1007/978-3-319-40496-7_6
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    Cited by:

    1. Stöllinger, Roman & Leitner, Sandra M. & Zavarska, Zuzana, 2023. "Functional specialisation and working conditions in Europe," Working Paper Forschungsförderung 284, Hans-Böckler-Stiftung, Düsseldorf.

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