Local embedding and economic crisis: Comparing lobster chains in Belize, Jamaica and Nicaragua: Iris Monnereau and A. H. J. (Bert) Helmsing
What factors and forces shape opportunities for local economic development under conditions of globalization of production and trade? Discussions on this question in the past few years have focused on the role of global value chains as a principal avenue for local economic development. Value chains are said to shape opportunities for insertion into markets and for upgrading of local enterprises. Upgrading can take different forms: process, product, functional and intersectoral. Functional upgrading has been considered the best avenue for local economic development, as it results in greater value appropriation by local enterprises. However, the degree and nature of upgrading of local enterprises is greatly influenced by their relationships with other firms in the chain. These relationships have been categorized in various ways (e.g. Schmitz 2004). Consequently, research along these lines has concentrated on governance of the chains to define these relationships and the room available for upgrading. Global value chain theory suggests that dynamics in the relationships between chain actors are primarily defined by technology and market factors (Gerrefi et al. 2003). Chains may be driven by the producer, the buyer or the trader (Gerrefi 1994; Gibbon 2001). Buyer-driven chains are often argued to offer greater opportunities for functional upgrading than supplier-driven chains (Schmitz and Knorringa 2000). But opinions have become more nuanced of late, as functional upgrading neither always results in greater competitiveness nor is it always the most desirable for local economic development. Intersectoral upgrading and downgrading are alternative policy options (Meyer Stamer 2004). Though there is now less agreement on upgrading as an avenue for local economic development, inter-firm relations are still the focus of research, and the governance of chains is still seen as the principal explanation. Governance of chains is predominantly top-down: either Northern buyers or manufacturing firms or traders dominating a chain have the decisive influence on the position and positioning of producers in the South and on local economic development. This is a rather narrow approach to understand local economic development, as little attention is paid to the local conditions shaping the position and positioning of Southern producers. In this chapter we therefore want to go beyond chain
governance and consider other actors and factors that can explain opportunities for local economic development and for strengthening/improving the position(ing) of Southern producers. In our search for a broader explanation, we draw on the global production network (GPN) school of thought (Coe et al. 2008) and on business systems theory (Whitley 1999). As recently elaborated, amongst others, by Bair (2008), GPN stresses the importance of analysing the embedding of such production networks (Bair 2008). It goes beyond the linear structure used in the GVC approach to incorporate different kinds of networks. GPN attempts to encompass all relevant sets of actors and relationships, as chain governance alone may not have sufficient explanatory power to unravel the positioning of particular actors or firms in the chain (Bair 2008). Moreover, chain governance is not solely defined by technology and market structure but also by non-market-based power. The existence of barriers to entry can help us to identify power asymmetries (Kaplinsky and Morris 2001, 2008). The GPN approach distinguishes three levels of embedding: functional, societal and territorial (Coe et al. 2008). In addition, it recognizes that actors in particular global chains may be operating in multiple networks, and this very fact influences their positioning in particular networks or chains (Coe et al. 2008.). However, the GPN approach offers only a heuristic framework and lacks operational specificity (e.g. on the different types of embedding). We must therefore search for ways and means by which the framework can be made more specific. In that regard and in this chapter we draw upon business systems theory to assist us in framing the societal embedding of networks. This theory was originally elaborated at the national level and used to explain differences in economic achievements across Asian economies. To do so, Whitley (1999) analysed the nature of national economic institutions and economic coordination, notably (i) the nature of the state; (ii) the nature of state-business relationships; and (iii) the nature of the firm itself or way of doing business in a particular territory. Originally, Whitley was rather critical of the effects of globalization on national business systems. Later he emphasized the importance of examining interactions between global changes and national business systems, as these produce continued national divergences in ways not inconsistent with the GPN approach. Territorial embedding is operationalized by examining how actors in a particular production network are inserted in the local economy and the manner in which their network participation complements or competes with other local economic activities. The principal author of this chapter has studied lobster fishing in different countries in the Caribbean Basin,1 notably Belize, Jamaica and Nicaragua. In all three countries lobster is destined for the US market (Figure 9.1). This offered an interesting empirical setting to examine the extent to which functional embedding of lobster value chains is (dis)similar in the three countries concerned. It also provided scope for determining the extent to which differences in terms of position and positioning of Southern producers can be explained by country-level differences in societal and territorial embedding. The economic crisis which started in 2008 greatly affected the lobster chain in the three countries. Demand and prices fell drastically. This offered additional
research opportunities: (i) to examine how the three lobster chains coped with the economic shocks; (ii) to determine the mechanisms through which the effects spread throughout the chains; (iii) to learn the extent to which differences in local embedding enabled actors, situated at different functional positions in the chain, to cope with the crisis; and (iv) to investigate the extent to which (what kind of) upgrading was a means to overcome the economic consequences of the crisis. The chapter starts with a comparative analysis of the lobster chains and their functional embedding. Thereafter, it makes a (partial) analysis of societal and territorial embedding. This is followed by an analysis of the effects of the economic crisis on lobster chain dynamics and the position of particular chain actors in each country. The final section offers conclusions.