GLOBAL VALUE CHAINS AND COMPETITIVE ADVANTAGE: UPGRADING STRATEGIES AND PERFORMANCE OUTCOMES

Abstract

Global value chains (GVCs) shape how firms compete by fragmenting production across borders and concentrating high-value activities (design, branding, advanced services) in specific nodes. Evidence suggests GVCs remain central to world trade-World Development Report 2020 notes that “almost 50% of global trade involves GVCs” and estimates that a 1% increase in GVC participation can raise per-capita income by more than 1%. Yet, participation alone does not guarantee better outcomes: performance depends on whether firms and clusters can “upgrade” into higher value-added tasks under specific governance structures. This article synthesizes core upgrading pathways-process, product, functional, and chain upgrading-and explains how each generates (or fails to generate) sustainable competitive advantage. Drawing on the GVC governance framework (buyer-driven vs supplier-driven modular/relational/captive/hierarchical structures) and value-added trade metrics (TiVA), the paper develops a results-oriented model linking upgrading strategy to measurable outcomes: domestic value added in exports, productivity, unit margins, resilience, and market diversification. The discussion highlights practical conditions enabling upgrading (capabilities, standards compliance, supplier ecosystems, logistics, skills, and innovation systems), as well as risks of “thin” upgrading (e.g., productivity gains without margin capture). Policy and managerial implications emphasize capability-building, supplier development, and strategic positioning in GVC governance to convert participation into durable performance gains.