Lesson 3: What are GVC

In this lesson, we will delve into the concept of Global Value Chains (GVCs), their dimensions, and their role in shaping the global economy.

  1. Understanding the Value Chain
  • The value chain encompasses all activities that firms and workers undertake to take a product from its conception to its end use and beyond.
  • These activities include research and development (R&D), design, production, marketing, distribution, and support to the final consumer.
  • A value chain can exist within a single firm or span across multiple firms in a global context.
  1. Globalization of Value Chains
  • In the era of globalization, value chain activities are often carried out through inter-firm networks on a global scale.
  • GVC analysis focuses on the sequences of tangible and intangible value-adding activities that span from product conception to end use.
  • It offers a holistic view of global industries, examining how lead firms manage their global networks and how these decisions impact economic and social development in various countries.

  1. Dimensions of GVC Analysis
  • GVC analysis explores six basic dimensions, which can be categorized into global (top-down) and local (bottom-up) elements:
    • Input-Output Structure: Identifying the main activities or segments within a value chain.
    • Geographic Scope: Analyzing the global dispersion of industry activities and in which countries they are performed.
    • Governance Structure: Understanding how a value chain is controlled and coordinated by firms.
    • Upgrading: Examining the movement within the value chain, how producers shift between different stages, and overall industry development.
    • Institutional Context: Evaluating the local economic, social, and policy conditions that influence value chain participation.
    • Industry Stakeholders: Identifying key actors in the value chain and their roles.

3.1 Input-Output Structure

  • Identifies the main activities or segments in a global value chain.
  • Activities can vary by industry and typically include research and design, inputs, production, distribution, marketing, and sales.
  • Mapping the value-added process involves tangible and intangible goods and services, which are critical for understanding the value created at different stages of the chain.
  • Each segment of the value chain has distinct characteristics and dynamics.
  • Identifying the type of companies involved, such as global or domestic, state-owned or private, large or small, helps understand the chain’s governance structure.

3.2 Geographic Scope

  • GVCs have evolved due to improvements in transportation and telecommunications.
  • Supply chains are now globally dispersed, and activities are carried out in different parts of the world.
  • Countries leverage their competitive advantages in assets to participate in industries.

3.3 Governance Structures in GVCs

  • Governance in GVCs refers to authority and power relationships determining resource allocation within a chain.
  • Different governance structures include market-based, modular, relational, captive, and hierarchical.
  • Lead firms often dictate how chains operate, whether through buyer-driven or producer-driven approaches.
  • Governance structures can evolve as industries mature, and multiple structures may coexist in a single value chain.

3.4 Economic Upgrading in GVCs

  • Economic upgrading involves moving to higher-value activities within GVCs to increase benefits.
  • Types of upgrading include process, product, functional, chain, entry, backward linkages, and end-market upgrading.
  • Upgrading patterns vary by industry and country based on value chain structure and institutional context.


3.5. Local Institutional Context

  • The local institutional framework shapes a country’s participation in each value chain stage.
  • Economic, social, and institutional conditions influence value chain insertion, including labor costs, infrastructure, education, regulations, and policies.
  • Comparative analysis across regions and nations helps identify the impact of institutional factors on economic and social outcomes.

3.6. Stakeholder Analysis

  • Stakeholder analysis involves mapping industry actors within the value chain.
  • Key stakeholders include companies, industry associations, workers, educational institutions, and government agencies.
  • Understanding stakeholder roles and relations at the local level is crucial for industry development and growth strategies.


  • Global Value Chains (GVCs) are a fundamental concept in understanding how products and services are produced and distributed on a global scale.
  • GVC analysis examines various dimensions, from input-output structure to governance, upgrading, and local contexts.
  • Recognizing the impact of GVCs and their dimensions is essential for businesses, policymakers, and researchers to navigate the complex landscape of the global economy.
Go back