Professor Gary Gereffi’s presentation focuses on the origins of the Global Value Chain (GVC) framework. It clarifies key GVC concepts and methods, including value chain mapping, value chain governance and value chain upgrading. The presentation concludes by examining the medical devices GVC in Costa Rica to show the GVC of a small country in high tech. Professor Gereffi presented this overview at the World Bank Group, Trade & Competitiveness GVC workshop on technical tools and operations in Washington, DC.

1. GLOBAL VALUE CHAINS AND DEVELOPMENT
Concepts and Methodologies
1
Gary Gereffi
Duke University
June 17, 2016
World Bank Group, Trade & Competitiveness
GVC workshop on technical tools and operations
Washington, DC

2. AGENDA
1. The New Global Economy
2. Origins of the GVC Framework
3. Clarifying GVC Concepts & Methods
 Value Chain Mapping
 Value Chain Governance
 Value Chain Upgrading
4. Small Countries and High Tech: Medical
Devices GVC in Costa Rica

3. © 2016 Duke CGGC
WHERE DO GVCS COME FROM?
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4. © 2016 Duke CGGC
The New Global Economy
Old World of Trade (pre-1980)
• Countries trade finished goods
• Build national industries (ISI)
New World of Trade
• Countries trade intermediate goods; imports needed to export
• Join global industries (EOI)
Trends
– GVCs  80% of world trade (UNCTAD, WIR 2013)
– Rise of intermediate goods trade (import content of exports): 20% in
1990; 40% in 2010; 60% in 2030 (P. Lamy, WTO)
– Consolidation within GVCs in fewer, larger suppliers
– Concentration of production and consumption in relatively few large
emerging economies

5. © 2016 Duke CGGC
Where does the idea of Value Chains come from?
5

6. © 2016 Duke CGGC
Google Scholar Publications Referencing
GVC/GCC/GPN Frameworks
0
500
1000
1500
2000
2500
3000
3500
4000
4500
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
GVC & GVCs
GCC & GCCs
GPN & GPNs
GVC: 4090 Publications in 2014
GPN: 1680 Publications in 2014
GCC: 692 Publications in 2014)
Google Scholar search results that mention a framework in their titles, abstracts, keywords, or full texts: global value chain (GVC), global production
network (GPN), and global commodity chain (GCC). Source: Google Scholar, https://scholar.google.com/. Retrieved Feb. 11, 2015.

7. © 2016 Duke CGGC
MAJOR STEPPING STONES
• GCCs (global commodity chains)  GVCs (global value chains)
(1990s-2000s)
• Rockefeller Foundation’s Global Value Chain Initiative (2000-
2005) -- https://globalvaluechains.org/
• Duke Center on Globalization, Governance & Competitiveness
(Duke CGGC) (2005-present) -- http://www.cggc.duke.edu/
• Adoption and Elaboration by International Organizations of
GVC Approach to Development (ca. 2009-2016) --
https://dukegvcsummit.org/
– E.g., World Trade Organization, OECD, World Bank, Inter-American
Development Bank, African Development Bank, Asian Development Bank,
ILO, UNCTAD, UNIDO, USAID, DFID, GIZ, etc.

8. © 2016 Duke CGGC
LANDMARK PUBLICATIONS
• “The organization of buyer-driven global commodity chains:
How U.S. retailers shape overseas production networks,”
Gereffi (in Commodity Chains & Global Capitalism, 1994)
– 2544 google scholar citations*
• “International trade and industrial upgrading in the apparel
commodity chain,” Gereffi (J of Internat’l Economics, 1999)
– 3256 google scholar citations*
• “The governance of global value chains,” Gereffi, Humphrey &
Sturgeon (Review of Internat’l Political Economy, 2005)
– 4259 google scholar citations*
*As of 06/16/2016.

9. © 2014 Duke CGGC
CLARIFYING GVC CONCEPTS
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10. © 2014 Duke CGGC
TYPES OF CHAINS
• Global Supply Chains
– Logistics (transportation focus: reduce time + costs)
– Trade Facilitation (lower barriers at the border)
• Global Commodity Chains
– Producer-driven chains: Trade + FDI (e.g., aircraft, autos, mining, oil)
– Buyer-driven chains: Trade w/o FDI (e.g., consumer goods); global
subcontracting by retailers, brands & supermarkets
• Global Value Chains
– Rise of intermediate goods trade (import content of exports: 20% in
1990; 40% in 2010; 60% in 2030 – P. Lamy)
– Create, capture & sustain domestic value added (e.g., Chinese i-
Phone example; build capabilities of domestic suppliers)
• Regional Value Chains
– Growing in importance, esp. since 2008-09 and in emerging
economies; beyond fragmentation and EOI development model.
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11. © 2014 Duke CGGC
LINKING GLOBAL CHAINS AND LOCAL CLUSTERS
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12. © 2014 Duke CGGC
GOVERNANCE & UPGRADING
12
Global value chain analysis provides both conceptual and
methodological tools for examining the global economy
• Top-down: a focus on lead firms and inter-firm
networks, using varied typologies of industrial
“governance”
• Bottom-up: a focus on countries and regions, which
are analyzed in terms of various trajectories of
economic, social and environmental “upgrading” (or
“downgrading”)

13. © 2014 Duke CGGC
DIMENSIONS OF GLOBAL VALUE CHAIN ANALYSIS
13
1. Value Chain Mapping
2. Geographic Scope
3. Governance Structure: Lead
Firms & Industry Organization
4. Local Institutional Context
5. Industry Stakeholders
6. Upgrading Trajectories
GLOBAL
LOCAL

14. © 2014 Duke CGGC
VALUE CHAIN MAPPING
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15. © 2014 Duke CGGC
EXAMPLE 1: FRUIT & VEGETABLES VALUE CHAIN
Analyzing the position of different countries in the value chain can allow you to identify
countries that have successfully upgrading & then examine the policies and changes they
implemented to successfully achieve that functional upgrading.
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16. © 2014 Duke CGGC
UPGRADING TRAJECTORY:
PRODUCTION TO PACKING AND COLD STORAGE
16
Packing&ColdStorage
(FunctionalUpgrading)
Typically women are hired to work in the packing
plants. They must follow strict procedures to pack
the products and prevent losses as well as protect
against sanitary problems.
Skills Preparation
Short training,
certification, and/ or
on-the-job training
Institutions
Governments, private sector,
buyers, training institutions

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WORKFORCE DEVELOPMENT AND UPGRADING
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18. © 2014 Duke CGGC
JOB PROFILES AND UPGRADING
18
Production for Export Packing & Cold Storage Processing
Skill Level
Value Chain
Segments
Job Profiles

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EXAMPLE 2 -- OFFSHORE SERVICES:
A Simplified View of Upgrading
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ITO – Information technology outsourcing
BPO – Business process outsourcing
KPO – Knowledge process outsourcing
ITO  BPO  KPO

20. © 2014 Duke CGGC
© 2013 Duke CGGC
OFFSHORE SERVICES GLOBAL VALUE CHAIN
Infrastructure
Software
Network Management
Applications Management
Applications Development
Applications Integration
Desktop management
CRM
(Customer
Relationship
Management)
HRM
(Human Resource
Management)
ERM
(Enterprise
Resource
Management)
Marketing &
Sales
Finance &
Accounting
Procurement,
Logistics and
Supply Chain
Management
Training
Payroll
Recruiting Contact
Centers/Call
Centers
Talent
Management
Content/
Document
Management
ITO
Information Technology Outsourcing
BPO
Business Process Outsourcing
KPO
Knowledge Process Outsourcing
Horizontal Activities
Vertical Activities a
Industry specific b
Banking, Financial
Services and
Insurance (BFSI)
Ex. Investment research,
private equity research,
and risk management
analysis
Telecommunications
Ex. IP transformation,
Interoperability testing and
DSP and multimedia
Manufacturing
Ex. Industrial Engineering
and sourcing and vendor
management
Retail
eComerce and Planning,
merchandising and
demand intelligence
Health/Pharma
Ex. R&D, clinical trials,
medical transcript
Others
Travel &
Transportation
Revenue management
systems, customer loyalty
solutions
Business Consulting
Business Analytics
Market Intelligence
Legal Services
Energy
Ex. Energy Trading and Risk
Management , and Digital
oil field solutions
ERP (Enterprise Resource Planning):
manufacturing/operations, supply chain
management, financials & project management
Infrastructure Management
IT Consulting
Software R&D
ValueAdded
LOW
HIGH
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21. © 2014 Duke CGGC
EXAMPLE 2: OFFSHORE SERVICES
GLOBAL SUPPLY AND DEMAND
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22. © 2014 Duke CGGC
MAPPING SELECTED COUNTRIES – OFFSHORE SERVICES GVC, 2008
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23. © 2014 Duke CGGC
OFFSHORE SERVICES UPGRADING:
INDIA, PHILIPPINES & CHILE
23
India
1990s – 2010 Early 2000s Mid to late 2000s
Philippines
Early 2000 Mid 2000s Late 2000
Chile
2000-2008 2007-2010 2010

24. © 2014 Duke CGGC
VALUE CHAIN GOVERNANCE
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25. © 2014 Duke CGGC
PRODUCER-DRIVEN AND BUYER-DRIVEN GLOBAL COMMODITY CHAINS
Source: Gary Gereffi, “The organization of buyer-driven global commodity chains: How U.S. retailers shape overseas production networks,” in G. Gereffi & M. Korzeniewicz (eds.), Commodity Chains and
Global Capitalism (Praeger, 1994), p. 98.
Producer-driven Commodity Chains
Manufacturers Distributors
Retailers and
Dealers
Domestic and Foreign Subsidiaries
and Subcontractors
Retailers, branded marketers, and traders require full-package supply from overseas factories.
U.S. MARKET
Buyer-driven Commodity Chains
OVERSEAS
Branded
Marketers
Retailers
Branded
Manufacturers
Traders
Overseas
Buyers
Factories
Notes: Solid arrows are primary relationships; dashed arrows are secondary relationships.
Branded manufacturers ship parts for overseas assembly and re-export to the manufacturer’s home market

26. © 2014 Duke CGGC
GVC LEAD FIRMS & THEIR SUPPLY CHAINS
26
Giant Retailers: Wal-Mart
 Largest retailer in the world directs the biggest supply chain
 > 60,000 suppliers worldwide and over 80% are in China
Global Brands: Nike
 Nike, the largest sportswear company in the world, does not own any
factories.
 Nike products made in 930 factories (subcontractors) in 50 countries
 >1 million workers in supply chain, but just 38,000 direct employees
in U.S.
Manufacturers w/o Factories: Apple
 Apple, the top smartphone company in the world, designs and
markets its products but owns no factories
 Foxconn, the largest electronics contract manufacturer in the world,
makes Apple products and employs >1 million workers in mainland
China

27. © 2014 Duke CGGC
Five GVC Governance Types
27
G. Gereffi, J. Humphrey & T. Sturgeon, “The governance of global value chains,”
Review of International Political Economy 12, 1 (2005), p. 89.

28. © 2014 Duke CGGC
Determinants of GVC Governance
Governance
Type
Complexity of
transactions
Ability to codify
transactions
Capabilities in
the supply-base
Degree of
explicit
coordination and
power
asymmetry
Market Low High High
Modular High High High
Relational High Low High
Captive High High Low
Hierarchy High Low Low
Low
High
Network
org.
forms
Gereffi at al, “The governance of global value chains,” RIPE (2005), p. 87.

29. © 2014 Duke CGGC
Dynamics in Global Value Chain Governance
Governance
Type
Complexity of
transactions
Ability to codify
transactions
Capabilities in the
supply-base
Market Low High High
Modular  High 
Relational High  Low  High 
Captive High High Low
Hierarchy High Low Low
 increasing complexity of transactions (harder to codify transactions; effective decrease in supplier competence)
 decreasing complexity of transactions (easier to codify transactions; effective increase in supplier competence)
 better codification of transactions (open or de facto standards, computerization)
 de-codification of transactions (technological change, new products, new processes)
 increasing supplier competence (decreased complexity, better codification, learning)
 decreasing supplier competence.(increased complexity, new technologies, new entrants)
High High
Gereffi at al, “The governance of global value chains,” RIPE (2005), p. 90.

30. © 2014 Duke CGGC
Multiple Governance Structures in
UK-African Fresh Vegetable Value Chains
Dolan, Catherine, and John Humphrey. 2004. "Changing Governance Patterns in the Trade in Fresh Vegetables between Africa and the United Kingdom."
Environment and Planning A 36:491-509.
(2000s)

31. © 2014 Duke CGGC
Multiple Governance Structures Within the
Offshore Services Value Chain
31
Relational
Governance Structure
Modular Governance
Structure
Market Governance
Structure
Hierarchal
Governance
Structure
Captive
Governance
Structure
Past
Multiple
Governance
Structures

32. © 2014 Duke CGGC
VALUE CHAIN UPGRADING
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33. © 2014 Duke CGGC
ECONOMIC UPGRADING
• Strategies used by firms, clusters, and countries to
improve their positions in global and regional
value chains
• Product upgrading - moving into more sophisticated product lines
• Process upgrading - transforms inputs into outputs more
efficiently by reorganizing the production system or introducing
superior technology
• Functional upgrading - acquiring new functions (or abandoning
existing ones) to increase the overall skill content of the activities
• Chain upgrading – entry or diversification into a new value chain
by leveraging the knowledge and skills acquired in the current
chain
©2014 Duke CGGC

34. © 2014 Duke CGGC
Functional Upgrading in GVCs: Linear View
Upgrading refers to
the strategies that
stakeholders
(countries, regions
and firms) can take
to improve their
position within the
global economy.
Gereffi, Gary and Jennifer Bair. 2001. “Local Clusters in Global Chains: The Causes and Consequences of Export
Dynamism in Torreon’s Blue Jeans Industry”. World Development. Vol. 29 No. 11
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35. © 2014 Duke CGGC
WHERE ARE THE HIGH-VALUE ACTIVITIES IN GVCs?
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36. © 2014 Duke CGGC
Apple’s Smiling Curve and GVC for iPhones
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Source: Grimes & Sun, “China’s evolving role in Apples GVC,” Area Development & Policy, 2016.

37. © 2014 Duke CGGC
The Smile Curve in GVCs: Variations
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38. © 2014 Duke CGGC
TRIPLE BOTTOM LINE:
Diversified, Inclusive and Green Growth
Economic
Upgrading
Social
Upgrading
Environmental
Upgrading
Sustainable Growth
Development Outcomes:
• Job creation
• Exports
• Income generation
• Added value
• Better use of
resources
• Backward linkages
Development
Outcomes:
• Inclusion of
vulnerable
groups
• Job creation
• Improve working
conditions
• Higher wages
• Skills acquisition
Development
Outcomes:
• Soil preservation
and improvement
• Water
conservation
• Wildlife
conservation
• Pollution and
waste reduction

39. © 2014 Duke CGGC
GVC Upgrading: Empirical Indicators
©2014 Duke CGGC
• Product Upgrading  Unit price of goods
• Process Upgrading  Productivity measures
• Functional Upgrading  Backward/forward links
• Chain Upgrading  Economic diversification
into new or related industries
• Social Upgrading  Wage rates, working
conditions
• Environmental Upgrading  Carbon footprint

40. © 2014 Duke CGGC
COSTA RICA’S MEDICAL DEVICES GVC
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41. © 2014 Duke CGGC
Components
Manufacturing
Plastics extrusion
& molding
Precision metal
works
Electronics
development
Software
Development
Weaving/Knittin
g Textiles
Assembly
Packaging
Sterilization
Assembly /
Production
Distribution &
Marketing
Resin Metals
Chemicals Textiles
Input Suppliers
Disposables
US$575.5 million
Instruments
US$270.5 million
Capital Equip.
US$32.5 million
Therapeutics
US$301 million
Main Segments: Exports
Post-Sales
Services
Consulting
Maintenance,
Repair
Training
Research &
Product
Development
Regulatory
Approval
Process
Development
Sustaining
Engineering
Prototype
Local firms are mainly in packaging & support services (12 of 19) versus 4 in limited
role in plastics molding & metal finishing and 1 OEM with exports under $2 million.
Number of Firms
0 - 5
6 - 10
11 - 15
16 - 20
COSTA RICA IN THE MEDICAL DEVICES GLOBAL VALUE CHAIN, 2012
Wholesale
distributors
Individual Patients
Doctors & Nurses
Hospitals
(Public/Private)
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42. © 2014 Duke CGGC
0
200
400
600
800
1,000
1,200 1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
ExportValues($USMilion)
Year
Costa Rica's Medical Exports by Product Category: 1998-2011
Disposables Therapeutics Instruments Capital Equipment
EVOLUTION OF MEDICAL DEVICES EXPORTS FROM COSTA RICA,
1998-2011
• Disposables still the largest product category exported, but no longer a
strong growth area.
• Exports in surgical instruments have grown steadily since 2005.
• Therapeutics has become 2nd largest category since 2008; likely to increase
as newly established firms complete transfer of new product lines.
• Limited export of highest value capital equipment (eg. Electronic/software
devices)
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43. © 2014 Duke CGGC
Entry Year Firm
Characteristics
Main Product
Export Category
Core Market
Segments
Product
Examples
Select
Firms
Up to 2000
24 firms:
8 US
15 CR
1 German
4 OEMs
8 Components
1 Input distributor
7 Packaging
1 Finishing
3 Support services
Disposables
Drug delivery;
Women’s health
Intravenous tubing (I)
Mastectomy bra (I)
Hospira;
Baxter;
Amoena;
Corbel
2001–2004
13 firms:
9 US
3 CR
1 Colombian
3 OEMS
6 Components
1 Finishing
1 Logistics provider
2 Support services
Instruments Endoscopic surgery Biopsy forceps (II)
Arthrocare;
Boston Scientific;
Oberg Industries
2005–2008
8 firms:
7 US
1 Puerto Rico
2 OEM
4 Components
1 Packaging
1 Finishing
Therapeutics
Cosmetic surgery;
Women’s health &
urology
Breast implants (III)
Minimally invasive
devices for uterine
surgery (II)
Allergan;
Tegra Medical;
Specialty Coating
Systems
2009–2012
21 firms:
16 US
1 CR
1 Ireland
1 Japan
2 Joint ventures
(US-CR)
5 OEMS
7 Components
2 Non-OEM
assemblers
1 Input Distributor
2 Sterilization
2 Packaging
Therapeutics
Disposables
Instruments
Cardiovascular
Drug delivery
Heart valves (III)
Dialysis catheters (III)
Guide wires (III)
Compression socks (I)
Abbott Vascular
St. Jude Medical
Covidien
Moog
Synergy Health
Volcano Corp.
FIRMS IN THE COSTA RICA MEDICAL DEVICES SECTOR
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44. © 2014 Duke CGGC
UPGRADING SUCCESS:
A LEADING MEDICAL DEVICES MNC
2010
Initial plant reopens
after restructuring
• 2004: Manufacturing functions
• 2012: Engineering for process improvements Focused on cardiology
segment; strategy – to alleviate R&D costs in the US.
Functional
Upgrading
• Biopsy forceps Labor intensive, basic metal works & extrusion.
• Urethral stent Thermoforming, laser marking, coating capabilities.
• Guide Wires  Sophisticated Laser cutting & welding.
• Today – CR facilities cover 42 manufacturing processes.
Product & Process
Upgrading
• Gastroenterology segment  Urology  Cardiovascular
Market
Diversification
• Recent co-location of sterilization vendors will allow the firm to export directly
to global distribution centersForward Linkages
2004
First production plant
opens in Costa Rica
(10,000m2)
2008
Second plant opens.
(32,000m2)
First plant restructuring
2005 2011
Exports:
US$18 million
Exports:
US$120 million
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45. © 2014 Duke CGGC
BRAZIL AND MEXICO:
MEDICAL DEVICE EXPORTS, 1998-2011
0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
8,000
9,000
1998 2000 2002 2004 2006 2008 2010
ExportValue(US$Million)
MEXICO
• Disposables: largest product category &
growing
• Brazilian government & private sector
actors working to promote price-competitive,
mid-tech exports.
• Stabilizing disposables exports
• Strong focus in instruments
• Growing gains in capital equipment 
participation in electronics value chains
0
50
100
150
200
250
300
350
400
450
500
1997 1999 2001 2003 2005 2007 2009 2011
ExportValue(US$Million)
Year
BRAZIL
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46. © 2014 Duke CGGC
http://www.cggc.duke.edu
ggere@soc.duke.edu
Gary Gereffi
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