hess whither global production networks.pdf

Whither Global Production Networks in Economic Geography?

Past, Present and Future

Martin Hess

Geography, School of Environment and Development, University of Manchester,

Oxford Road, Manchester M13 9PL

Email: martin.hess@manchester.ac.uk

and

Henry Wai-chung Yeung

Department of Geography, National University of Singapore,

1 Arts Link, Singapore 117570

Email: geoywc@nus.edu.sg

Forthcoming in Environment and Planning A, Special Issue on “Global Production

Networks”, Vol.38, 2006.

Acknowledgement

We would like to thank Jamie Peck and Ros Whitehead for their efficient handling of the

review process of this special issue. We are grateful to all the paper presenters and

participants in the three paper sessions on “Global Production Networks” at the Philadelphia

centennial meeting of the Association of American Geographers in March 2004 for their

important contributions to the development of global production networks as a research

paradigm in economic geography. We would also like to thank the authors who have

subsequently developed their papers specifically for this special issue and waited patiently for

the issue to be published. And finally, our sincere thanks to Neil Coe and Peter Dicken for

their critical and constructive comments on a first draft of this essay. However, we are solely

responsible for the content in this editorial.

10 November 2005

1. How did it all begin? Genesis of the global production networks framework in

economic geography

Over the last five years, considerable progress has been achieved in economic geography in

developing a sophisticated theoretical framework for analyzing territorial formation and

economic development in the global economy. This genre of theoretical development has

shown the continuing unevenness of the spatiality of production and consumption, the

differentiating role of structural and institutional conditions at various scales, and the

responses and strategies of firms, non-firm organisations and government bodies shaping the

global economy across space and time. In this introductory paper, we use the “global

production networks” (GPN) framework to describe this increasingly important body of

literature in economic geography and its cognate disciplines in development studies and

economic sociology. We trace the historical antecedents of the GPN framework in economic

geography, assess the state-of-the-art of this GPN-inspired literature (next section), and

discuss the future prospects for a common research agenda (final section). In doing so, we

will contextualize and introduce the five subsequent papers in this special issue.

There is no doubt that the GPN framework in economic geography has a diverse set of

historical precursors – mostly from outside the discipline. Broadly, we can identify four

highly influential intellectual antecedents in relation to their historical contexts: (1) the value

chain framework in strategic management since the early 1980s; (2) the networks and

embeddedness perspectives in economic and organizational sociology since the mid 1980s;

(3) the actor-network analysis in science studies since the mid 1980s; and (4) the global

commodity/value chain analysis in economic sociology and development studies since the

mid 1990s. We will discuss below each of these four strands of intellectual antecedents and

link them to the contested evolution of key research paradigms in economic geography.

In Table 1, we provide a summary of these four strands of literature that predates the GPN

framework in economic geography. With hindsight, it is fair to note that as the concept of

“value chain” was gaining prominence in different research and policy circles through the

pioneering work of Michael Porter (1980; 1985) during the early 1980s, explaining the

spatial uneven development of capitalist economies was the “big issue” confronting radical

economic geographers (e.g. Harvey, 1982; Massey, 1984; Smith, 1984). Interestingly, while

both strands of literature took the concept of “value” seriously, there was little cross-

fertilization at the conceptual level. At around the same time, the geography of enterprises

seemed to preoccupy the research attention of many industrial geographers who were

concerned primarily with territorial systems of business enterprises and their industrial

linkages (e.g. Hamilton and Linge, 1979; 1981; 1983). The value chain framework eventually

found its way into economic geography through the work of Peter Dicken (1986) and

subsequently a large body of literature on transnational corporations and regional

development.

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Table 1 here

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In retrospect, the value chain framework associated with Porter’s work has provided a crucial

but contested analytical concept for the GPN framework – especially in relation to value and

its contestation over space. This explicit concern with how value is created, enhanced, and

captured in different spatial configurations fundamentally underpins the theoretical

framework developed by researchers associated with what Bathelt (2006) calls the

“Manchester School” of global production networks (e.g. Henderson et al., 2002; Coe et al.,

2004). Here, value is defined in both Marxian notions of surplus value and more conventional

understandings in terms of economic rent. The GPN framework thus brings together the

different strands of the analysis of value in an integrated form. Another important

contribution of the value chain framework to the development of GPN work is that it

recognizes the conceptual inseparability between manufacturing and service activities in

constituting economic production. In the original version of Porter’s value chain, both kinds

of economic activities are central to value chain processes. While some economic

geographers have long argued for this integral understanding of production in relation to

social divisions of labour (see Sayer and Walker, 1992), its theoretical significance has

become much more magnified through the GPN framework because we simply cannot

understand manufacturing activities without a concomitant analysis of how these value

activities are organized through a wide range of service imperatives (e.g. finance, logistics

and retail). What is more, considering the importance of services in the modern world

economy makes research on service-sector GPNs an important task in its own right.

This deep concern with the organization of GPN activities – manufacturing or service-related

– brings us to the second historical antecedent of the GPN framework. Since the mid 1980s,

networks and embeddedness have come to dominate the lexicon in economic sociology,

organization studies, and strategic management (see Guillén et al., 2003; Smelser and

Swedberg, 2005). Sociologists have been interested in social network analysis since the

1920s and the 1930s (Kilduff and Tsai, 2003). This genre of work focuses on social

interaction as the micro-foundation of society. It was not until the mid 1980s that the idea that

economic action being embedded in networks of ongoing social relations was resurrected by

the work of Mark Granovetter (1984). Following Karl Polanyi’s work, Granovetter argued

against the atomistic reading of economic relations in transaction cost economics associated

with Oliver Williamson (1975; 1985). Since then, this idea of embeddedness and networks

has strongly reverberated in management and organization studies. An enormous range of

theoretical and empirical studies has focused on how network embeddedness can enhance

business formation and firm performance (Dacin et al., 1999).

While this theoretical development in networks and embeddedness has profoundly impacted

upon economic sociology and management studies, its diffusion into economic geography’s

lexicon remained relatively slow until the early 1990s (Peck, 2005; Grabher, 2006). In

particular, Dicken and Thrift (1992) made a strong case for economic geographers to take

networks and embeddedness very seriously in the geographical analysis of firms and their

productive activities. This initiative towards networks and relations in spatial formations

provided the disciplinary platform for what has subsequently emerged as the “relational turn”

in new economic geography (Bathelt and Glückler, 2003; Yeung, 2005). Specifically, a group

of economic geographers have taken the embeddedness of economic actors as the central

analytical focus in their research (Grabher, 1993; Yeung, 1994; Hess, 2004). By the late

1990s, the concept of embeddedness had become one analytical cornerstone of the GPN

framework in economic geography (Dicken et al., 2001; Henderson et al., 2002).

What might seemingly be missing in an embeddedness framework that relies on the structural

analysis of network relations, however, is the role of geographical agents such as firms. This

concern with the disappearance of actors in the “sea” of network relations has compelled

economic geographers to understand better the nature and properties of networks and their

constituents. The work of actor-network analysis in science and technology studies since the

mid 1980s becomes highly useful here (Law and Hassard, 1999). The geographical

adaptation of this analysis through the work of Nigel Thrift (1996) and Jonathan Murdoch

(1997), among others, is critical in the development of a non-essentialist version of the GPN

framework in Dicken et al. (2001). In particular, actors such as the firm are theorized in the

GPN framework not as individual agents per se , but as a constitutive part of the wider

network through which emergent power and effects are realized over space. This conception

of actors and their power relations clearly improves on the earlier geographical work in

industrial systems that focused primarily on economic linkages between and among firms.

What, then, does this relational framework focusing on networks mean for analyzing the

global economy? This is where the final strand of literature concerning the global

commodity/value chain analysis (GCC/GVC) makes the greatest impact. Influenced by

Immanuel Wallerstein’s world-system framework, in which different countries are sorted in a

cascading order of core, semi-periphery, and periphery economies, the GCC/GVC analysis

gained prominence after the mid 1990s, following the work by Gary Gereffi and Miguel

Korzeniewicz (Gereffi and Korzeniewicz, 1990; 1994). Together with other researchers in

development studies (e.g. Dieter Ernst, John Humphrey, and Hubert Schmitz), they have

constructed an analytical framework that focuses on the global scale (Gereffi et al., 2005).

The GCC/GVC analysis, in particular, has been shown to provide enormously important

insights into a wide range of economic development issues such as industrial upgrading,

technological and employment change, market expansion, trade patterns, and so on.

The GCC/GVC analysis, however, does suffer from some significant shortcomings that can

be remedied through the GPN framework (see Dicken et al., 2001; Henderson et al., 2002).

First, while the chain concept in the GCC analysis brings multiple geographical scales,

particularly the global scale, to the forefront of its analysis, the geography of GCCs remains

weakly developed and under-theorized – no doubt a reflection of the origin of the framework

in sociology. The issue of territoriality is highly aggregated in the GCC framework,

identifying the spatial units of analysis as either core or periphery. This is where the GPN

framework in economic geography makes stronger claims because it deals with how actors in

various GPNs are anchored in different places and multiple scales (from the national to the

local scale). A more recent refinement of the GPN framework in Coe et al. (2004) has made

an explicit analytical link between GPNs and (sub-national) regional development – a core

issue for economic geographers since the 1980s.

Second, the institutional dimensions of the GCC/GVC analysis seem to be hijacked by its

privileging of governance structures. The former includes the role of state policies and

institutional conditions in shaping development outcomes in different places and regions.

This line of analysis has been reinvigorated in the “new regionalism” literature in geography

since the mid 1990s (see MacLeod, 2001), although, until recently, the precise connection

between regional development and GPNs remains underdeveloped (see Coe et al., 2004).

GCC/GVC analysis places much greater emphasis on alternative governance structures that

are associated with the peculiar configuration of GCCs/GVCs in different industries and

sectors. For example, in the clothing industry, the key driver is argued to be global buyers

who dictate the terms of garment manufacturing. In the automobile industry, lead firms

(assemblers) drive the entire GCC/GVC through their assembly plants located in different

regions and countries.

To sum up, the historical antecedents of the GPN framework are complex and variegated. In

many ways, the GPN framework associated with the Manchester School represents a

geographical take that integrates these different, and yet disparate, strands of conceptual

frameworks to analyze the global space-economy. By drawing distant actors such as firms

and non-firm institutions into a common analytical framework, the GPN analysis seeks to

provide a dynamic conceptual apparatus that is sensitive to multiple scales and power

relations. It remains to be seen, however, if the GPN framework has delivered on its promise

in research in economic geography – a critical issue to which we shall turn now.

2. What do we know so far? State-of-the-art of GPN and related work in economic

geography

As we have seen, the analysis of global production networks and how they relate to socio-

economic development at various scales has come a long way over the last few years. There

is now a growing body of literature that draws on this framework to answer the main

questions of this strand of research, namely: How are GPNs constructed and how do they

evolve? What are the underlying governance structures driving this evolution? Who,

ultimately, benefits and loses through incorporation in or exclusion from GPNs, and in which

places? In order to answer these questions, it is useful to think along the conceptual lines of

research of the “Manchester School” variety and consider the dimensions of value, power and

the embeddedness of individual and collective actors (see also Johns, 2006).

There can hardly be any dispute in (critical) economic geography about the uneven nature of

the capitalist world economy, which results in a spatial mosaic of prosperous and

underdeveloped places, regions, and states, or what elsewhere has been termed an

archipelago economy (Veltz, 1997; Hess, 2004: 176). This has always been recognised in

critical social science and therefore is nothing new (Coe and Yeung, 2001: 370). What is

important, however, is the fact that an increasing number of social scientific studies now

apply some form of network or relational approach to analysing the causes and mechanisms

of uneven socio-economic development. This clearly departs from former state-centred

approaches and thus offers a viable alternative to methodological nationalism (Pries 2005),

which tends to over-play macro-economic rationales and the role of the nation-state as the

most important arena of economic and societal development (Henderson et al., 2002). This is

not to say the nation-state has lost importance as a major actor in global production networks,

nor in regulating the global economy, as we shall see below. Rather, it points to how

contemporary GPN/GVC analysis, in economic geography as well as cognate disciplines,

puts an emphasis on the multi-scalarity of processes of value creation and industrial

upgrading (Bair and Gereffi, 2003; Palpacuer and Parisotto, 2003; Liu et al., 2004; Coe and

Hess, 2005).

To date, some of the most sophisticated network analysis of upgrading and value creation,

enhancement and capture can be found in literature based on the GVC school of research

(Schmitz, 2004; Gereffi et al., 2005). This work scrutinizes in great detail how the insertion

of firms and regions into GPNs affects their prospects for development, although this view is

not uncontested and concerns have been raised about the benefits of integration into the

global economy for local companies (e.g. Kaplinsky, 2005). Against this research backdrop,

the contributions by Parthasarathy/Aoyama and Grote/Täube in this issue demonstrate

impressively how GPN-informed research can contribute to our knowledge of local

upgrading in the global economy. Moreover, both papers show that economic theory

(transaction cost or otherwise) is not sufficient for analysing the opportunities and threats

related to upgrading. In their paper, Parthasarathy and Aoyama elaborate on the notions of

institutional thickness and local entrepreneurship in the presence of multinational companies

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