Global and regional value chains: Opportunities for European SMEs' internationalisation and growth

14-02-2019

International value chains have emerged as the new paradigm for the organisation of production globally. Today, most production processes across the world are vertically fragmented as a result of the increased unbundling of tasks and functions and their sourcing from different geographical locations. The extent to which this expansion in supply-chain trade is global in character (which some describe as the 'Factory World' phenomenon), or is rather based on more intra-regional ties clustered around Europe, Asia and the Americas, is still being debated in the literature. Notwithstanding their geographical characteristics, international value chains offer increased opportunities for enterprises, by fostering their growth and internationalisation irrespective of their scale and size. To SMEs, they offer a broader range of channels through which they can participate more actively in global markets. By linking with international supply chains, SMEs can take a first step up the ladder, which – through spill-overs and knowledge transfers – can often give them access to assignments of higher added value. With greater interconnectedness, however, comes greater complexity. Not all SMEs are able to take advantage of the opportunities and link with international value chains in an effective way. More importantly, however, for those that do manage to integrate into international production chains, the magnitude and nature of the benefits will critically depend on the SMEs' entry point and position in global production networks and the links they can develop within those networks.

International value chains have emerged as the new paradigm for the organisation of production globally. Today, most production processes across the world are vertically fragmented as a result of the increased unbundling of tasks and functions and their sourcing from different geographical locations. The extent to which this expansion in supply-chain trade is global in character (which some describe as the 'Factory World' phenomenon), or is rather based on more intra-regional ties clustered around Europe, Asia and the Americas, is still being debated in the literature. Notwithstanding their geographical characteristics, international value chains offer increased opportunities for enterprises, by fostering their growth and internationalisation irrespective of their scale and size. To SMEs, they offer a broader range of channels through which they can participate more actively in global markets. By linking with international supply chains, SMEs can take a first step up the ladder, which – through spill-overs and knowledge transfers – can often give them access to assignments of higher added value. With greater interconnectedness, however, comes greater complexity. Not all SMEs are able to take advantage of the opportunities and link with international value chains in an effective way. More importantly, however, for those that do manage to integrate into international production chains, the magnitude and nature of the benefits will critically depend on the SMEs' entry point and position in global production networks and the links they can develop within those networks.