Abstract:
This article uses nine case studies of global supply chains (GSCs) in Southern Cone countries to explore the extent to which economic and social upgrading are linked and spread from lead firms to their supply chain. While economic and social upgrading are found in lead firm segments throughout the case studies, the impacts on suppliers are varied. Pattern groupings enable the authors to develop a three-part typology of development in GSCs, in the light of which they consider the roles of public policies, company behaviour and social actors in addressing developmental outcomes for GSC lead firms and suppliers. T expansion of global supply chains (GSCs) in recent decades has established the predominance of this business model in global production, trade and investment. GSCs have spread widely in Asia, as the principal channel of outsourced production, and are increasingly expanding in Africa (World Bank et al., 2017). Evidence shows that countries in Latin America and the Caribbean participate relatively less in GSCs than countries from these other regions. Active participation has however been found in labour-intensive assembly processes, among others in the apparel, toy and auto parts industries in Mexico and in countries of Central America and the Caribbean. There are also examples of participation in more knowledge-intensive areas, such as engineering and design in the Mexican automotive industry (ECLAC and ILO, 2016). The Southern Cone, by contrast, is a subregion in which the largest economies have a strong tradition of import substitution industrialization, and where labour market institutions are often comparatively well structured. These economies have been incorporated into GSCs more recently. International Labour Review 678 From a developmental perspective, it is not only participation in GSCs that matters, but also whether that participation is a vehicle for upgrading, in both economic and social terms. Participation in GSCs is widely promoted as a development strategy that can open opportunities to spur economic growth and employment generation, and to raise competitiveness (World Bank et al., 2017; WTO et al., 2019; UNCTAD, 2013 and 2018). However, it is also recognized that incorporation into GSCs has not always brought economic upgrading, understood as the successful transition over time into higher value added activities (Barrientos, Gereffi and Rossi, 2011). Moreover, and more importantly from the point of view of labour, economic upgrading has not automatically led to social upgrading (Milberg and Winkler, 2013). When speaking of social upgrading, it is important to consider not only the quantity of employment but also the quality of jobs. Governance through policies, institutions and private and public actors can play an important role in promoting more inclusive economic and social upgrading in GSCs, and in preventing and mitigating the effects of negative spillovers and downgrading pressures (Mayer, Phillips and Posthuma, 2017). This article explores the extent to which economic and social upgrading are linked within supply chains, with particular attention to whether upgrading spillovers are spreading from lead firms to domestic suppliers. To this end, we examine nine case studies of GSCs in Southern Cone countries, identifying three typological patterns in economic and social upgrading between lead firms and suppliers, namely oppositional development, truncated development, and more integrated upgrading within the chain. Key findings from our analysis of this research show that lead firms in the nine GSC case studies achieved both economic upgrading (moving into higher value added activities) and social upgrading (improving the quality of employment). However, in the case of suppliers of inputs and intermediary goods, we find diverse outcomes of both upgrading and downgrading spillovers from lead firms. Under the pattern of oppositional development, downgrading effects were prevalent among smaller suppliers engaged in lower value added, resourceand/or labour-intensive activities. Under the pattern of truncated development, lead firms attained modest economic and social upgrading, but policies and other conditions were inadequate to foster backward linkages1 and developmental spillovers among potential domestic supplier firms. Two cases of more integrated upgrading within the chain were associated with policy and institutional frameworks that promoted more balanced economic and social upgrading in both lead firms and their suppliers, while also preventing or diminishing downgrading pressures. Overall, informal and small-scale firms in low value added activities experienced downgrading pressures through price, quality and scale requirements, and faced greater challenges to seize potential 1 We use the term “backward linkages” to refer to the channels through which information, materials and financial resources flow between a company and its supplier(s), creating inter-firm interdependence. Economic and social upgrading in global supply chains 679 upgrading opportunities within the supply chain. These findings raise a number of policy implications, which we explore later in this article. The remainder of this article is organized into five sections. The first outlines the conceptual framework of our study and introduces the typologies of economic and social upgrading in the nine GSCs examined. The second section presents our methodology and the selection process of the GSC case studies used in our analysis. In the third section, we discuss the key findings from the sectoral case studies, organized according to the typology. The fourth section seeks to identify public policies and institutions that can play a role in contributing to a broader and more inclusive process of economic and social upgrading in GSCs. We present our conclusions in the fifth section. Conceptual framework and the typology of economic and social upgrading found in the case studies The expansion of GSCs and participation in them by firms and workers in developing and emerging economies have drawn attention to their developmental potential to spur economic growth, boost participation in trade, transfer technology and know-how to local firms and create jobs (World Bank et al., 2017). The main aim of this article is to contribute to the policy literature on GSCs and, therefore, while this section traces some key lines of the broader literature, it focuses on policy debates on this subject. The literature examining the developmental impacts and policy implications of GSC participation has paid close attention to inter-firm relations between lead firms buying goods and services and supplier firms. Earlier GSC literature tended to focus mostly on economic impacts, such as rising output, increased value added of products, greater productivity and competitiveness, technology transfer and access to new markets (Gereffi, 1995; Humphrey and Schmitz, 2002). Over time, an increasing number of authors have highlighted the effects of GSCs not just on job creation, but also on job quality, labour rights, good working conditions, formal employment relationships, the role of trade unions and levels of unionization. The importance of examining impacts on workers and labour institutions has been confirmed by documented cases of labour abuses, including violations of fundamental principles and rights at work, such as child and forced labour in GSCs, especially in the lower tiers of supply chains (Mezzadri, 2014; Barrientos, 2013; Phillips, 2011; McGrath, 2011). The terminology of “economic upgrading” and “social upgrading” emerged in the literature in order to characterize the developmental impacts of GSCs on Southern firms and workers in the Global South (Barrientos, Gereffi and Rossi, 2011; Milberg and Winkler, 2013; Bair, 2008). The definitions put forward were along the following lines: • Economic upgrading comprises four different types of upgrading: process upgrading, which involves changes that aim to increase the efficiency of the production process; product upgrading, in which more advanced products are introduced; functional upgrading, which involves a shift in activities International Labour Review 680 toward higher value added tasks; and chain upgrading, in which the firm shifts to a more technologically sophisticated production chain in a new industry or product market. • Social upgrading is the process of not only creating jobs but also improving the skills, terms and conditions of work, labour rights and entitlements of workers in ways that enhance the quality of their employment. The term refers to the ILO’s Decent Work Agenda, which involves employment, social protection, rights at work and social dialogue. This concept encompasses two components: measurable standards, such as type of employment relationship, wages, hours of work and social protection; and enabling rights, which include freedom of association and the right to collective bargaining. This terminology aims to conceptualize, measure and analyse the impacts of GSCs on firms and workers in developing countries. Nevertheless, authors acknowledge the complexity of defining this terminology (Lee and Gereffi, 2015) and the fact that links between economic and social upgrading may vary between different sectors and GSCs (Kaplinsky, Terheggen and Tijaja, 2011; Bamber and Fernandez-Stark, 2013). Some authors have criticized the economic and social upgrading terminology as being “lead firm centred”, without adequately reflecting the perspective of local firms and workers at lower tiers in the supply chain with regard to the upgrading process (Krauss and Krishnan, 2016), which underscores the importance of examining impacts on different segments within supply chains. The concept of social upgrading, in particular, has received criticism for not taking adequate account of workers’ agency in promoting their organization and representation, and of the constraints to worker m
