The Global Value Chain And The Upgrading Of Local Industrial Clusters In The Developing Countries

This paper adopts the combination of the cluster and global value chain approach to demonstrate an observation that local clusters in the developing countries must enter a much broader cluster which we call it global value chain to survive and develop further in the global competition. In accordance with the traditional international labor division and transnational investment theory, the global value chain approach both from the micro and the macro angles reexamine the international labor division entirely under the globalization. We find that the global production system dominated by transnational companies in substance is some sort of labor division on the different stages of global value chain among the countries or areas. Because participating in the global economy brings both opportunities and danger. The main danger is getting locked into a race to the bottom, especially for the developing countries. Generally speaking, those of small and medium size enterprises in developing countries witness the relentless price competition in global market, especially for labor intensive products, find that participating in and gaining from the global economy do not always go together.What this paper tries to show is that the success of a cluster depends on not only whether dynamic collective efficiency can be achieved, but also whether it can keep swift in the interaction with global production system. This paper establishes a leveraging model, which describes the general upgrading trajectory of enterprises or clusters both from market expansion capacity and the technical capacity.