Increasing the participation of developing countries in global value chains (GVCs) is now an accepted G20 priority. However, there is disagreement over how multinational corporations (MNCs), which drive GVCs, can be persuaded to incorporate small and medium enterprises (SMEs) from developing countries into the GVCs they co-ordinate. The choices range from conscious industrial strategies oriented towards coercive measures designed to force MNCs to integrate SMEs into their value chains, to facilitative approaches designed to attract MNCs to invest and, over time, incorporate domestic suppliers into their value chains. Nonetheless, there is consensus on the key constraints that inhibit the growth of SMEs in general, and their inclusion into GVCs in particular: transaction costs; access to network infrastructure; and the capacity of firms and supporting institutional arrangements. Accordingly, we offer a high-level framework of recommendations for G20 states’ consideration.
Authors: Peter Draper and Chiziwiso Pswarayi
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