ABSTRACT
According to UNCTAD’s World Investment Report 2013, global value chains (GVCs) coordinated by multinational corporations (MNCs) account for roughly 80 percent of global trade, and this value-added in trade contributes about 30 percent on average to the GDP in developing countries. While an extension of the GVC network would be conducive to job creation and income growth in developing countries, participation in GVCs should also bring about upgrading of supply capacity on the part of local firms. For the local SMEs that have only limited exposure to global business practices, GVC participation could provide access to new technologies, innovations, and new markets. This, in turn, should lead to improvements in productivity and competitiveness. In reality, however, benefits to local firms are not automatically created, and proper facilitation by the state and conscious efforts by local firms to upgrade their capacities are called for. This chapter introduces the roles of GVCs in developing countries, and discusses the challenges and opportunities for local firms focusing on SMEs. This chapter then presents the main findings from a field survey-based case study of SMEs in Laos, in order to understand, in a realistic manner, the challenges that local SMEs in developing countries face.
