globalvaluechain

A global value chain (GVC) refers to the interconnected network of activities and processes that span multiple countries to produce a final product or service. These chains involve the sequential flow of inputs, materials, and labor across different stages, from raw material extraction to final consumption. GVCs are a key feature of modern international trade, enabling businesses to optimize production, reduce costs, and access specialized skills and resources worldwide.

The concept of GVCs was introduced by economist Gary Gereffi in the 1990s to describe how firms coordinate activities across borders, often through contractual relationships, foreign direct investment, or trade in intermediate goods. These chains can vary in complexity, with some industries—such as electronics, automobiles, and textiles—relying heavily on cross-border specialization. For example, a smartphone may be designed in the United States, with components manufactured in China, assembled in Vietnam, and sold globally.

GVCs play a critical role in economic growth by fostering efficiency, innovation, and competition. However, they also present challenges, including supply chain vulnerabilities, labor exploitation, and environmental impacts. The COVID-19 pandemic highlighted these risks, as disruptions in one region could halt production worldwide. Governments and businesses are increasingly focusing on resilience, sustainability, and ethical sourcing to mitigate these issues.

Key participants in GVCs include lead firms (or "drivers") that coordinate production, suppliers providing intermediate goods, and workers in various stages. The structure of a GVC can range from hierarchical (where lead firms exert strong control) to market-mediated (where transactions are more decentralized). Understanding GVC dynamics is essential for policymakers, businesses, and researchers to navigate global trade, ensure fair labor practices, and promote inclusive economic development.