Global value chains and technological capabilities: a framework to study industrial innovation in developing countries

This paper presents a critical review of the Global Value Chain (GVC) literature in light of the “Technological Capabilities” approach to innovation and learning in LDCs. This form of industrial organization may be particularly beneficial for firms located in LDCs, which are bound to source technology internationally. However, the issues of learning, technological efforts and investments to create and improve technological capabilities at the firm-level remain largely uncovered by the GVC literature. In this study we propose a shift in the research agenda at the theoretical and empirical level. First of all, we argue that research should focus on the endogenous process of technological capability development, on the specific firm-level efforts, and on the contextual factors enhancing and/or hindering the process. Secondly, we claim that it is necessary to study the mechanisms allowing knowledge to flow within and between different global value chains, which in turn will make easier to unravel why some firms and/or clusters benefit more or less from being part of the GVCs. Thirdly, innovation theories and the study of the features of knowledge in the mechanisms described above may substantially contribute to improve our understanding of these complex and multidimensional phenomena. We argue that explicitly addressing these issues within the global value chains literature by using the concepts developed by the technological capabilities literature may importantly contribute to explain developing countries’ firms performance, and why and how they benefit in different degrees from participating in global value chains. To this aim we propose a better use of firm-level data through existing and to be developed surveys and questionnaires.