Geography Reference
In-Depth Information
become especially evident as forms of global production organization since
the 1980s, when the modularization of production processes and the out-
sourcing of specialized functions, combined with ICT technologies, became
a viable alternative to vertical integration (Ernst 1997, 2005; Guy 2009).
The increasing relevance of the GPN phenomenon has shown that radical
changes occurred in the last few decades in the organizational and govern-
ance relationships within and across industries at the global level, and, in
turn, these relationships have affected the development and upgrading of
opportunities for the localities and the firms involved (Coe et al. 2008).
As we saw in Chapter 4, the value-chains and production networks
of vertical and horizontal linkages between MNEs and local small and
medium enterprises at the global scale 'act as mechanisms to weave
together various specialized industrial clusters, giving rise to a
network of
clusters
' (Sturgeon 2000). In line with the 'heterarchical MNE' discussed
in Chapter 3, the literature on flexible production has long pointed to
the network organizational form as being superior in terms of efficiency,
market response and innovation to the vertically integrated form of inter-
national production (Piore and Sabel 1984; Scott 1988; Walker 1988;
Storper and Walker 1989). In such organizational structures rapid cross-
border dispersion coexists with agglomeration and current globalization
often occurs as an extension of regional clusters across national borders.
This implies, firstly, that some stages of the value chain are internationally
dispersed while others remain concentrated, and secondly, that even the
globally dispersed activities typically congregate in a limited number of
sub-national regions and clusters (Ernst et al. 2001).
Such profound organizational changes reflect increasing pressures to
exploit complementarities that result from the systemic nature of knowl-
edge. GPNs thus encompass both intra-firm and inter-firm linkages,
create a diversity of network participants, link together multiple locations,
and cover a variety of value chain stages, including higher-end and more
knowledge-intensive activities (Ernst et al. 2001, 2002, 2010). The number
of networks and the intensity of competition vary across sectors, reflect-
ing their different stages of development and their idiosyncratic industry
structures (Ernst and Guerrieri 1998; Ernst et al. 2001). As reflected in the
figures reported above in this section, what has mostly characterized the
last two decades is the fact that outsourcing and offshoring do not concern
anymore only manufacturing, but also a variety of high-end, knowledge-
intensive support services that are intrinsically linked with production.
Even if these activities do not involve formal R&D themselves, they may
give rise to considerable learning and innovation, such as trial production,
tooling and equipment, productivity benchmarking, testing, process adap-
tation, product customization, and supply chain coordination.
