2. ‘Capturing Value’ within Global Production Networks
Chapter 14
‘Capturing Value’ within Global Production Networks

3. Review Concepts to Review Key Words
GPNs, codified and explicit knowledge, bargaining between TNCs and local economies; resource industries; geographical inequalities
Key Words
Stakeholders, value, value creation, knowledge management, labour strategies

4. Concept of Value Definitions GPNs and value ‘Economic rent’
Value is surplus above cost in performing the transformations at that stage
Raises issues beyond firm competitiveness and profitability
GPNs and value
Value in GPN is created, enhanced and captured where its parts are located
A place’s involvement in GPNs creates net benefits/costs
Concern over firms transferring activities out of home countries
Defensive investment: taken to protect markets and ensure that the firm prospers, which consequently helps the domestic firm

5. Value of a Particular Locality
Dimensions of a place’s involvement: capital injection, local firm stimulus, knowledge diffusion,
local employment creation
Not all overseas ventures involve capital transfer into host economy
Net gain to host country depends on trading practices of TNC
Local link formation by TNCs depends on three major influences:
The TNC’s strategy and the role played by the local operation in it
Characteristics of local economy
Time
Criticism: many TNCs procure only low-level inputs from local sources
Differences between dependent and developmental linkages

6. Value and Diffusion Knowledge transfer and GPNs
Knowledge transfer to local population in terms of training
Doesn’t guarantee that the benefits of this knowledge will
be diffused through the host economy
The nature of the TNC inhibits the spread of proprietary technologies
Evidence for technology transfer to developing countries is mixed
Knowledge transfer requires absorptive capacity on the part of locals
Both codified and explicit knowledge required for knowledge diffusion
GPNs and the host state
Relative bargaining power of firms versus local economies is crucial
Balance between creating the right conditions to attract GPNs and tying oneself too closely to specific GPNs
Problems of dominance of local economy by foreign-based firms —although such firms are to some degree necessary
In such cases non-national goals may become dominant

7. Value and Employment Impact of GPNs on jobs TNCs and local employment
Local interest is mainly in the effect of GPNs on local jobs
High-road versus low-road job scenarios
Direct versus indirect job creation
Offset jobs created by the number of jobs displaced by adverse effect on local firms: NJ = DJ + IJ – JD
GPN establishment also involves reorganization of home country operations
Impacts of offshoring include: export stimulus effect, home office effect, supporting firm effect, production displacement effect
TNCs and local employment
Net employment effect: NE = XE + HE + SE – DE
Quantity of jobs, quality of jobs and location of jobs
Exploitation of cheap labour is one of the major charges levelled at TNCs
TNCs and local labour relations
Variation exists in degree of TNC HQ’s involvement in labour relations
Dispersed nature of TNCs makes it difficult for labour to organize against them
Possible counters: global union federations, networks of workers
Contracts: firms differentiating between core and non-core workers