Tijdschrift voor Economische en Sociale Geografie – 2006, Vol. 97, No. 5, pp. 470–479.© 2006 by the Royal Dutch Geographical Society KNAGPublished by Blackwell Publishing Ltd., 9600 Garsington Road, Oxford OX4 2DQ, UK and 350 Main Street, Malden, MA 02148, USA

GLOBALISATION, FIRM UPGRADING AND IMPACTS ON LABOUR

PETER KNORRINGA & LEE PEGLER

Institute of Social Studies, P.O. Box 29776, 2502 LT The Hague, the Netherlands. E-mails: knorringa@iss.nl; pegler@iss.nl

Received: June 2005; revised February 2006

ABSTRACTThe question that drives this paper is: When can we expect firm upgrading by developing-country suppliers in global value chains will lead to improvements in labour conditions? To dealwith this question we, (a) position firm upgrading in the global value chain approach, (b) investigateexisting evidence and conceptualisations on how economic globalisation impacts on labour, and(c) develop some hypotheses on when we can expect firm upgrading and improvements in labourconditions to go together. We conclude that firm upgrading in developing-country suppliers inglobal value chains as a rule does not lead to improvements in labour conditions. Instead, themuch broader and more forceful process of immiserising growth makes it very unlikely thatworkers in such relatively low-skilled production activities will enjoy improvements in labourconditions. Ethical sourcing may lead to improvements in labour conditions of core workers infinal product manufacturers and key supplier firms, but it is as yet unclear to what extent such abusiness model can and will be disseminated. More generally, even though economic globalisationdoes selectively create new jobs, even labour conditions of core workers may be under pressurewhile the overall proportion of core workers appears to be declining.

Key words: Labour, employment conditions, global value chains, firm upgrading, globalisation,

decent work, ethical trade, corporate social responsibility

INTRODUCTION

This paper aims to contribute to the debate onhow economic globalisation impacts uponlabour, using the Global Value Chain (GVC)approach as an analytical device. A dominantfeature in the GVC literature is the broad con-sensus on the idea that, in order to cope withthe pressures of globalisation and to remaincompetitive, firms need to continuouslyupgrade (Best 1990; Womack & Jones 1994;Schmitz 2004). Much less is known about howthis drive towards upgrading impacts uponlabour. Conceptually, broad brush views divergefrom those who assume that economic globali-sation implies a cost-driven ‘race to the bottom’which inevitably leads to deteriorating labour

conditions, while others expect that continu-ously upgraded processes and products alsorequire higher skilled and motivated workerswho can and will earn a premium in the labourmarket (ILO 1999). Moreover, in recent discus-sions about ethical trade and corporate socialresponsibility it is often pointed out that dis-tributors of branded products are increasinglyaware of the need to show relatively highstandards of labour conditions in ‘their’ supplychains (Barrientos

et al.

2003). Finally, while thefirst wave of empirical GVC studies did not paymuch attention to labour issues at all, morerecent GVC studies have started to addressspecific labour issues in the value chain andcountry context of particular case studies(Nadvi 2004).

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Notwithstanding such initial conceptual andempirical efforts to address labour issues in theGVC approach, we feel that a useful next step inthe debate would be to develop a more systematicunderstanding of how economic globalisationimpacts upon labour. As a first step in this process,this paper develops a set of working hypotheseson where and when firm upgrading and im-proved labour conditions are more likely to occurand may possibly even reinforce each other.At the same time, our selective overview ofempirical and conceptual efforts to assess theimpacts on labour shows that situations wherefirm upgrading and improvements in labourconditions are likely to go together will be theexception rather than the rule.

The paper is structured as follows. The follow-ing section positions the GVC approach in thedebate on the need for upgrading in the era ofeconomic globalisation, and argues the case forpaying systematic attention to labour issues.The third section discusses both empirical andconceptual attempts to show how economicglobalisation in general, and inclusion in GVCsin particular, impacts on labour. The fourthsection formulates some hypotheses on whereand when firm upgrading and improvements inlabour conditions are more likely to occur, drawssome preliminary conclusions, and provides twosuggestions for further research.

GLOBAL VALUE CHAIN ANALYSIS AND FIRM UPGRADING

The value chain perspective draws attention tothe sequence of activities stemming from productconception to the final consumer, stressing theimportance of activities other than productionitself, notably design, logistics and marketing(Gereffi & Kaplinsky 2001; Kaplinsky

et al.

2002).Moreover, control of a value chain does notrequire owning the manufacturing operation nordirect management of all activities (Cowling &Sugden 1993). According to Jarillo (1993), inmost recent successful examples of industrialorganisation, the leading actors in value chainsfocused only on a few strategic activities. In valuechains that produce and sell labour-intensiveconsumer goods, such as footwear or garments,the leading actors are large retailers, (ex-) manu-facturers of established brand names andimport-wholesalers. In such buyer-driven chains

these lead firms ‘act as strategic brokers in linkingoverseas factories with evolving product nichesin the main consumer markets’ (Gereffi 1999).

Relationships between producers and leadfirms are usually characterised by a complexmix of market, hierarchy and networks.Although theoretically one could set a breakingpoint where leading actors switch from arms-length contracts with independent suppliers towholly-owned subsidiaries, the business world isfull of many intermediate forms that fill thecontinuum between perfect market and purehierarchy. Relationships often display charac-teristics of uneven networks within which lead-ing actors manage relationships that are bothobligatory and asymmetrical (Pfeffer & Salancik1978; Johanson & Mattson 1987; Sako 1992). Insuch vertical inter-firm relationships, elicitingselective co-operation has proven to be anefficient strategy, both in theory (Axelrod 1984;Ring & van der Ven 1994), and in the Italianand Japanese success stories of new competition(Best 1990; Sako 1992). A general, but oftenimplicit proposition from this literature is thatmore quality-driven or high-road production alsoentails higher levels of trust in inter-firm rela-tionships in value chains (for a critical overview,see for example Humphrey & Schmitz 1998).Lane (1998) argues that in the case of intensifiedquality-driven competition, trust has becomemore necessary but also more problematic.Her proposition is that trust is at present aneven more important precondition for successthan before, while at the same time intensifiedcompetition makes trust more difficult todevelop and more risky to invest in.

Notwithstanding these difficulties, a quality-driven or high-road environment may well offermore opportunities for organisational learningwhich, in turn, increases the likelihood of up-grading. Upgrading in the value chain literatureis usually broken down into:

•

process upgrading (doing things better);

•

product upgrading (producing better goods);

•

functional upgrading (engaging in additionaland higher value-added activities) (Humphrey& Schmitz 2002, 2004).

A key issue in the present GVC literature is theextent to which asymmetrical relationshipswith buyers provide suppliers with opportunitiesfor learning and upgrading. Recent studies

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(among others Gereffi 1999; Schmitz & Knor-ringa 2000) argue that global buyers often playa significant role in process and productupgrading, especially for their more favouredsuppliers, and especially in the initial stages withincipient producers (Schmitz & Knorringa 2000).The controversial issue is whether suppliers arealso able to achieve functional upgrading, andto determine the role buyers play in furthering,neglecting or obstructing functional upgradingby their suppliers. While Gereffi’s study on gar-ments recognises that there are many obstaclesto functional upgrading, he emphasises thedynamic learning curves that producers in valuechains are exposed to: moving from mereassembly to monitoring the entire productionprocess, to design and sale of their own brandedmerchandise. In contrast, Schmitz & Knorringa(2000) found that in the footwear industry globalbuyers tended to see attempts at functionalupgrading as encroaching on their core compe-tencies and actively discouraged such attempts.

The GVC debate has from the start looked atquestions like how suppliers can be: ‘lockedinto dependent relationships across territoriesthrough considering issues of cooperation,competition, power’ (Kaplinsky

et al.

2002,p. 1160). The original formulation of the globalcommodity chain approach by Gereffi (1994),draws its inspiration from Wallerstein’s worldsystem approach, with strong roots in depend-ency thinking. However, in the first wave of GVCstudies the attention was almost exclusivelyfocused on inter-firm relationships, basicallyneglecting impacts on labour. In more recentGVC studies labour is increasingly broughtinto the analysis, but we feel there is a need tofurther systematise attention for labour in GVCstudies that aim to shed light on opportunitiesand threats from economic globalisation ondeveloping countries.

After all, positive impacts on the quantity andquality of employment as a result of inclusionand upgrading in GVC are often assumed bypolicy-makers, but such claims too often lacksolid evidence (ILO 1999). The findings fromGVC studies are mixed (Kaplinsky

et al

. 2002;Nadvi 2004). Moreover, the broad field oflabour studies brings in some pertinent con-siderations that should alert us to be extremelycautious about sweeping generalisations whenit comes to where and when firm upgrading

may also lead to an improvement in labourconditions.

Labour studies emphasise the asymmetricalpower relations between employers and workers,conceptually similar but empirically often evenmore pronounced as compared to the asymme-trical power relations between global lead firmsand local suppliers. Asymmetrical power relations,as well as the scope for mutual benefits withinthese hierarchically structured relationshipshave been a central theme in GVC analysis.Therefore, one would expect GVC researchersalso to be sensitive to the consequences of powerdifferentials on labour conditions. In the nextsection we discuss the significance of theseasymmetries for labour analysis and attempt toprovide bridges between labour studies andGVC literature. This enables us to develop amatrix scheme linking inter- and intra-firmcharacteristics of upgrading in the fourth section.

IMPACTS ON LABOUR

In this section we present a selective overviewof recent conceptual and empirical work onhow economic globalisation impacts uponlabour. To set the scene, we briefly discuss somekey concepts and main stylised findings fromlabour studies on impacts of globalisation.Second, we summarise the empirical findingson labour impacts as part of the GVC literature,to establish how these findings compare to thestylised findings from labour studies. Finally, wepresent some main conceptual approachesused within the GVC literature which containhypotheses about labour impacts.

Increasing labour market flexibility –

The broaderlabour studies literature on the impacts ofglobalisation predominantly evolves around theimplications of increasing labour market andemployment flexibility (Standing 1999). Animportant link to the inter-firm value chainliterature discussed above is the question ofto what extent trust is likely to play a role inasymmetrical relationships. In labour studiesit is argued that fundamental asymmetries inemployment and industrial relations implythat labour rights improvements, especiallythose based on trust, may not be consistent withflexibility requirements in global productionnetworks.

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Basically the need for more flexibility at thefirm level is ‘passed on’ to workers in terms ofmore insecure and precarious labour conditionsand it is here that labour studies would seriouslyquestion the suggestion that trust is likely toemerge in these more flexible employmentrelations (Norris & Munday 1995). Instead ofexpecting mutual trust to really provide a mainimpetus to quality and productivity improve-ments, it seems more likely to assume that mostworkers simply work harder because they areafraid to lose their jobs (Delbridge 1995). Ratherthan being based on trust, employment rela-tions continue to be primarily based on control,conflict and consent (Marsden 1999; Pegler2002). Finally, while core workers in final productproducers and key supplier firms may enjoyimproved employment conditions, due to furtheroutsourcing the proportion of such core workershas significantly decreased. The overall pictureis one of fewer core workers at the global level,and more differentiation through various layerswithin firms, through local subcontractingarrangements and through internationalrelocation of economic activities. Higher skilled,higher paid and/or protected workers do notautomatically emanate from the insertion of adeveloping region in a global value chain.

Also the decent work agenda from the ILOunderscores the argument that flexibility maynot be helpful to building trust within employ-ment relationships (ILO 2002). Behind thefour basic principles of good jobs, no discrimi-nation, social coverage and representation isthe issue of security – something that, as arguedabove, flexibility of employment relations doesnot promote. Moreover, while low wages mayact as an initial inducement to value chaininclusion and growth through FDI, both FDIattraction and future export performance arestrongly and positively correlated with the basictenets of decent work – especially better labourrights and a more stable, equal representationalenvironment (Kucera 2001, 2004; see alsoNeumayer & de Soysa 2006).

In the broader debate on the impacts ofeconomic globalisation on labour, GVC analysisdoes not immediately present itself as a par-ticularly appropriate device. For example, issuessuch as skill levels are critical factors that influ-ence labour market dynamics, but these are notgenerally integrated within current GVC analysis.

However, GVC analysis can provide a fresh lensthrough which to look at labour issues. Forexample, in terms of wages, by improving ourunderstanding of who decides and earns whatat which nodes in the value chain, GVC analysiscan be an important source of information forunions and other activists to identify bottlenecksand leverage points for interventions (Kaplinsky& Morris 2002; McCormick & Schmitz 2002;Pegler & Knorringa 2006). Therefore, we feelit is useful to continue to explore to what extentGVC studies provide empirical and conceptualhandles on impacts on labour, and whetherthese ideas are in line with more generalobservations from labour studies as noted above.

Empirical findings on impacts on labour in GVCstudies –

Attention to labour issues is a recentphenomenon in GVC studies. A recent andcareful assessment of labour impacts in a setof GVC studies by Nadvi (2004) brings out twomain points that also reverberate from otherGVC studies that look at labour and employmentissues (Bair & Gereffi 2001; Kaplinsky

et al.

2002).First, lots of new jobs have been created in

‘greenfield’ locations, poor areas that becameattractive because of the supply chain logic ofcontinuously searching for cheaper locationswith sufficient skills for entry into GVCs.Jobs offered by final producers and some coresupplier firms in such new locations often provideclearly better labour conditions as compared tolocal alternative employment opportunities. Froma development perspective this at least initiallyleads to an important pro-poor economic stimulusas it generates new and relatively better-paidemployment in a specific locality (Nadvi 2004).

Second, value chain inclusion is frequentlyassociated with strongly segmented and dif-ferentiated employment conditions, increasinginsecurity and longer hours, especially at thefurthest end of the chain. In essence, this meansthat the general observation from labour studiesabout impacts of economic globalisation –increased insecurity and precariousness – isconfirmed by those GVC studies that have paidattention to labour.

Third, studies of workers attitudes suggest thatin contrast to their initial euphoria of employ-ment in such GVC supplier firms, workersquickly start feeling the physical and emotionalpressure and stress of new work systems as well

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as not feeling either more skilled or moresecure in their jobs (Norris & Munday 1995).Moreover, union representation has also beennoted to be under a new, more subtle but morepowerful threat (Delbridge 1995; Pegler 2002).In sum, while there may be a redistribution ofglobal employment which favours specific poorareas, from a qualitative and global perspectiveincreased competitive pressures are felt mostacutely on the last and weakest link in the chain– new groups of workers in poor areas.

Nevertheless, these empirical GVC studiessuggest that when firms enter as incipientproducers in GVCs, both firm upgrading aswell as improvements in local labour conditionsare often significant and occur simultaneously.Below we argue why simultaneous firm upgrad-ing and improvements in labour conditions aremost likely an exception to the rule, as they areusually limited to these initial phases of insertionin GVCs.

The existing empirical GVC studies thatinclude labour impacts do not yet really connectlabour issues to firm upgrading, except in thegeneral sense of confirming the visible trend ofcompetitive pressures leading to more precari-ous employment for larger groups of workerswithin the GVC (Nadvi 2004). However, on theconceptual side some significant progress hasbeen made by scholars that use the GVCapproach as one of their analytical devices. Inour view the most robust line of argument, putforward in the GVC context by Kaplinsky (1998),is on the concept of immiserising growth,

1

where:‘growing . . . participation in industrial activities– reflected in the level of industrial activity, thegrowth in physical trade and the increase inindustrial employment – may in fact becomeassociated with declining overall standards ofliving’ (Kaplinsky 1998, p. 4). This negativemacro effect is not because of an inefficientallocation of resources, but because of thepressures arising from economic globalisation.First, new suppliers in GVCs predominantly onlyprocess or produce consumer goods, while thedesigning, branding, marketing, and distributionis carried out by the global spiders-in-the-web.The revenues from being incorporated in aGVC as a mere cut make and trim assembler orprocessor are very limited as compared to therevenues associated with designing, branding,marketing and distribution. Second, because of

economic globalisation and increased competi-tive pressures all potential suppliers are ‘runningto stand still’: when all suppliers with limitedbargaining power upgrade their products andproduction processes they cannot earn a pre-mium from that investment, i.e. they will receivesimilar returns from a more costly productionprocess. This also means that those suppliersthat remain at the same quality level are oftensqueezed out or need to accept deterioratingsales conditions. The increased insecurity andprecariousness of workers in firms at the lowerend of the chain needs to be seen within thecontext of such firms being squeezed bytheir global spiders-in-the-web in a cut-throatcompetitive environment. Especially in thoselabour-intensive sectors where developingcountries have in recent decades become successfulexporters, this trend is likely to lead to im-miserising growth unless the firm or country inquestion can outpace competitors in process orproduct upgrading, or, even better but alsomore difficult, in functional upgrading. Whileindividual firms or a specific country may usethis as a successful development strategy, thetenet of the concept of immiserising growth isthat this survival of the fittest cannot constitutethe basis for a broader and more inclusivedevelopment strategy that also benefits weakereconomic actors and regions.

Kaplinsky concludes that: ‘in previous eras,participation in industrial segments of the valuechain provided the source for sustainable incomegrowth. But, increasingly, in a globalising econ-omy these industrial niches have become highlycompetitive, raising the spectre of immiserisinggrowth’ (Kaplinsky 1998, p. 31). He argues thatfirms or countries need to identify and exploitspecific rents from competitive advantages, butthat the main lesson from recent history is thatall rents are transitory and that new suppliersin GVCs basically carry out ‘rent-poor’ activities.Again, escaping from this immiserising-growthtrap is something that might be achieved bysome individual firms or countries, but thegeneral trend is expected to be one of: ‘decliningreal wages and declining real incomes in thosecountries specialising in rent-poor products . . .The challenges thus confronting producerseverywhere is to upgrade by appropriating what-ever categories of rents are within their grasp,but to do so more rapidly than competitors in

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the knowledge that a rate of innovation lowerthan the average will result in immiserisinggrowth.’ (Kaplinsky 1998, p. 34). This compellingand ‘gloomy’ picture brings home two messages.First, while improving labour conditions forspecific groups of (skilled) workers in particularfirms in specific GVCs are a transitory possibility,the overall trend for workers in developing countrysuppliers of GVCs is one of increased insecurityand precariousness, as well as downward pressureon real wages. Second, more general improve-ments in labour conditions will not emergefrom the existing type of economic globalisation.This suggests that any campaign to increase theprobability of labour rights improvements mustbe based on a broader and more inclusivehuman development agenda, for example byintegrating the decent work approach withinnational industrialisation strategies.

Another quite different line of argumentationcan be seen as an extension of modern manage-ment literature dealing with the challenges ofkey global companies to motivate their highlyskilled staff in a situation of high performanceambiguity (Ouchi 1980). Moral hazard is a mainthreat in a working environment where itbecomes more difficult, or virtually impossible,to assess the contribution of a particular personto the end result, as in the typical example of aresearch & development department of a majorglobal company. In this type of situation, social-isation has proved to be an effective complementto an authority relation in checking the threat ofmoral hazard (Ouchi 1980; Kochan & Osterman1994). To put it bluntly, due to a perception ofgoal congruence, workers self-police their effortsand do not even try to shirk, which enormouslyfacilitates monitoring (Whitley 1991). More-over, the workers in question are highly-skilled,relatively scarce, and possess significant tacitknowledge. Therefore, companies are anxiousto enlist and keep such ‘repositories of know-how’. This conceptualisation of workers and ofowner-manager-worker relationships clearly hasits merits in an increasingly knowledge-intensiveglobalising economy characterised by the needto continuously adapt and learn. Moreover,while the initial conceptualisation focused onR&D type of activities, at least parts of this logiccan be extended to a broader variety of activitiesin the value chain such as design and marketing,and even as part of the actual production of

goods (Palpacuer 1997, 2000; ILO 1999). How-ever, one should be careful not to over-generalisethe extent to which this approach can serve asa model for all types of labour relations. Inessence, it is a model primarily suited to thecore workers who carry out core activities incore firms in the value chain. Therefore, thismodel does not fit well with the type of labour-intensive processing activities that constitutethe bulk of production in developing-countrysuppliers in GVCs. In order words, adopting thismodel to conceptualise impacts on labour fromeconomic globalisation would amount to wish-ful thinking for the bulk of developing-countrylow-cost suppliers to GVCs. Moreover, its alreadylimited relevance may well diminish over time,due to possible further declines in core workerproportions. Finally, the labour studies literature,discussed above, also argued why, in situationsof higher inequality and bargaining differences,combined with relatively lower levels of tacitknowledge among more easily replaceableworkers, improvements in labour conditionsare unlikely to occur.

A third and more fashionable as well as morepromising line of argumentation is developedby a rapidly increasing number of authors whostress the potentially positive impact on labourthrough the drive towards corporate socialresponsibility (CSR), ethical sourcing, fair trade,and related initiatives (Blowfield 1999; Barrien-tos

et al.

2003). Even though these initiativesempirically provide at present only a glimmerof hope in an ocean of immiserising growth,such initiatives are often portrayed as possiblycatalytic interventions with potentially largeimpacts once consumers start wielding theirpotential bargaining power (Shaw

et al.

2005).According to a recent study by Pollin

et al.

(2004), significant improvements in wages ofgarment producers in Mexico would lead toonly very limited price increases at retail levelin the United States, a price increase well withinwhat American consumers, according to polls,are willing to pay extra for ‘responsibly’produced products. Also more generally, it seemssafe to assume that globally operating brandedcompanies could (if codes of conduct were bothinclusive and effective) push local entrepreneursin their supply chain to pay workers in develop-ing countries higher wages without compromis-ing competitiveness. Moreover, brand name

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companies can use ‘responsible’ or ‘ethical’sourcing as a marketing tool to strengthen theirbrand name goodwill. For example, a study onathletic shoe producers who source from Chinashowed how these brand name companieshave developed progressive codes of practiceto counter allegations of labour exploitation(Frenkel 2001).

Probably the best known example of CSRwith a supply chain focus is the Ethical TradingInitiative (<www.ethicaltrade.org>), in which agroup of well-known brand name companieswork together with trade unions and NGOsto ensure that labour conditions of suppliers‘meet or exceed international labour stand-ards’. Recent independent studies on ethicaltrade (summarised in Barrientos

et al.

2003, andat <www.ethicaltrade.org>) indicate that suchinternational labour standards are successfullymet for core workers in core supplier firms, butthat the picture becomes more variegated forindirectly employed workers or for smallerfirms and farmers who supply to core suppliersof global buyers.

2

Moreover, while ethical trade can and has led

to improvements in labour conditions in specificGVCs, it complements but cannot substitute fora broader development strategy in developingcounties (Barrientos 2000). Additionally andrelated to the previous points, strong codes ofconduct may well push out weaker and oftensmaller suppliers that pay lower and more ir-regular wages to poorer workers. While this leadsto relatively large benefits to a relatively smallgroup of workers in core suppliers, and to globalbrand name companies being able to claim fullethical sourcing, an increasing share of smallerand weaker producers are cut-off from theserelatively attractive supply chains and upgrad-ing opportunities. This may increase the gapbetween a relative elite of local firms supplyingto GVCs with improved labour conditions, and amass of local firms ruled by a ‘race-to-the-bottom’with deteriorating labour conditions (Gibbon &Ponto 2005).

Finally, a main reservation about optimismtowards the possible ‘rolling out’ of this approachis its almost inherent limitation to brandedconsumer products and to internationalisedcompanies/products. Whether branded pro-ducts will gain a larger or smaller share in futureconsumer markets is an open question, and will

depend among others on whether the fourbillion consumers ‘at the bottom of the pyramid’(Prahalad 2005) will in the near future startpushing for ethical sourcing.

CONCLUSION: AN EMERGING RESEARCH AGENDA?

This paper has investigated when firm upgrad-ing of developing-country suppliers in globalvalue chains (GVC) and improvements in labourconditions are more likely to go together. Whilefirm upgrading is a central issue in GVC studies,and more recent GVC studies increasingly alsopay attention to labour issues, employmentrelations and employment conditions have notyet been systematically incorporated into GVCanalysis.

The hypotheses in Table 1

3

roughly arisefrom the previous discussion and summarisesome working hypotheses on the likelihood offirm upgrading and improvements in labourconditions, focusing on different levels ofanalysis. A discernable trend in these hypothesesis that improvements in labour conditions aremore likely in situations that are less likely toapply to workers in developing-country low-costsuppliers in GVCs. Moreover, processes thatinfluence firm upgrading and those that influ-ence improvements in labour conditions appearto be rather weakly connected, with one importantexception: the initial inclusion of developing-country suppliers in GVCs.

4

So, while economic globalisation pushesfirms to upgrade, such firm upgrading does notas a rule seem to also lead to improvementsin labour conditions in developing-country sup-pliers in GVCs. This conclusion may not come asa surprise to scholars in labour studies, butfor some academics and practitioners in thefield of industrial policy it may be a soberingobservation. Even though improvements in thequantity and quality of employment are ofteninvoked as the ultimate justification in much ofindustrial policy, it seems clear that at leastwidespread and sustainable improvements inlabour conditions will not arise as a by-productfrom firm upgrading in GVCs. Instead, tocounteract the seemingly inevitable onslaughtof immiserising growth in many developingcountries as a key feature of further economicglobalisation in the present neo-liberal world

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order, two complementary strategies can beenvisioned to increase the number of excep-tions to the rule. First, to push the CSR and ethicaltrade agenda through raising awareness amongconsumers about their potential influence onglobal buyer purchasing strategies. This couldthen broaden the number of products andmarket segments within which ethical sourcingbecomes a real concern for supply chain man-agers. Second, to support the ongoing struggleby workers in developing countries and theircollective action representatives, whether unionsor NGOs, in an effort to increasingly implementthe ILO decent work agenda.

In terms of a possible research agenda onhow GVC analysis might help in getting a bettergrip on where and when firm upgrading canstimulate improvements in labour conditions,two suggestions can be made. First, new fieldresearch can more systematically unpack labourimpacts and can compare chains in terms oftheir differentiated labour conditions. Second,ethical sourcing presents itself as an interestingarea for future research. Not because it alreadyreaches substantial groups of workers in develop-ing countries, but because of its potential as arole model. Moreover, in principle the GVCapproach seems a suitable analytical device toconceptualise the role of consumers in valuechains in general and in ethical sourcing in

particular. However, this requires a systematicinclusion of consumer decision-making in GVCstudies (cf. Shaw

et al.

2005). In effect, thismeans that a further integration of labourissues, at one end of the chain, can be facilitatedby including attention for consumer decisionmaking, at the other far end of the chain.

Acknowledgements

This paper is completely different from but buildsupon a paper entitled ‘Shifting Perceptions of Labourrights and Conditions: SMEs in Global Value Chains’which was presented at an EADI Workshop on ‘Workingin Small Enterprises – Job Quality and LabourConditions in a Globalising World’, 17 January 2003,Free University, Amsterdam. Pertinent comments fromtwo anonymous referees are gratefully acknowledged,as are comments and support from Evert-Jan Visserand Meine Pieter van Dijk.

Notes

1. The phrase was initially coined by Bhagwati in1958, and further developed in Bhagwati (1987).

2. While the Ethical Trade Initiative is more or lessexclusively oriented towards reaching and consoli-dating compliance with direct labour standards,the Fair Trade movement goes a step further andalso addresses broader issues of for example,

Table 1. Working hypotheses on likelihood of firm upgrading and improvement in labour conditions.

Hypotheses Firm upgrading is more likely . . . Improvements in labour conditions are more likely . . .

Firm level When management has a longer-term commitment to the business and a stronger mix of technological and marketing expertise.

When activities require more skills and higher levels of tacit knowledge; when management offers more opportunities for representation and learning.

Value chain When the value chain is more quality-driven and/or brand sensitive.

When chain responsibility is more mainstreamed as part of ethical sourcing.

Country With a more active and sector-specific innovation and R&D policy; when a country is already on the ‘radar screen’ of global buyers.

When sector-specific labour markets are tighter; unions are more representative andinclusive; when political representation is more effective.

Global Increasing importance of standards and codes of conduct will lead to increasinglyselective upgrading in major branded global value chains.

With a stronger unifying role of globalunion bodies in co-determining global standards.

Source : Compiled by authors.

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market access (Blowfield 1999; Redfern &Snedker 2002).

3. A preliminary version of this table was presentedat a workshop on Local Development and ValueChains in Utrecht University, December 2004.

4. See for example Pegler & Knorringa (2006) forwhite goods in Brazil.

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