Indeed the research observes that targeting any particular level of GVC participation is not likely to be fruitful. The challenge is to extract more 'domestic value added' so that more of the returns feed back into Kiwis' pockets. The ability of a firm to join, remain or upgrade in any specific GVC depends on many factors, but the most important are the factors that support its comparative and competitive advantage, the structure of the GVC and the influence of the various players in it.
There is little point inculcating Kiwi firms to "move up the value chain" if they don't have the resources, innate competitive advantage, unique knowledge or ability to influence how that GVC works.
That's not to say firms shouldn't look for better ways of doing things to extract better returns. From a policy perspective, there is no silver bullet for helping firms be more successful in GVCs.
However, evidence points to the importance of having a flexible workforce that can adapt to changing consumer needs, the need to actively access in-market information on shifting trends and a supportive broader business environment that encourages nimble decision-making.
This underscores the importance of firms and industry bodies working collaboratively with agencies such as NZTE, MFAT, MBIE, and MPI to share knowledge, overcome information barriers and consider regulatory settings through a GVC lens.
There is little point inculcating Kiwi firms to "move up the value chain" if they don't have the resources, innate competitive advantage, unique knowledge or ability to influence how that GVC works.
The global value network (GVN) analysis focused on two high-tech businesses and one knowledge intensive service firm, all with impressive records of participation in value networks over many years.
Value networks differ from value chains in that there are more participants carrying out a broader variety of functions in a value network than in a value chain, where more linear producer-distributor-consumer relationships are more common.
The outcome of this research is very encouraging. The case studies show that New Zealand firms can and do succeed in the high-tech global economy despite the challenges of scale, distance and thin markets. Their success is possible because they have a sophisticated understanding of the factors which enable international firms to sustain their presence in GVNs.
While differing widely in many respects - scope of international activity penetration, industry sectors, and capability profiles - there are many common distinguishing features between the firms.
Importantly all focus their business models at offshore targets and have developed valuable intangible assets, especially intellectual property (IP), trade secrets and deep, trusted relationships with suppliers and consumers.
And they all pursue similar competitive strategies. They sustain their participation in GVNs by developing internal capabilities which are aligned to what their customers value highly. These successful GVN firms offer more than just the good or service being paid for. They bundle up consumer-focused free services and information to maintain their competitive advantage.
Together these studies have important implications for policy makers to consider.
Current NZ innovation policy is designed primarily around science-based, collaborative R&D, but this model is not the one successfully employed by the firms studied.
More focus on R&D that is shaped around product and client priorities is warranted.There may also be opportunities to shape our future IP regime to ensure value can be derived from unique intangible assets in ways that benefit NZ innovators.
The case studies all pointed to the critical importance of understanding market dynamics, building trust with customers and having flexible business models and adaptable workers.
NZ firms and policy agencies need a co-ordinated focused strategy to deal with the specificities and complexities of GVC and GVN dynamics.
Key recommendations
• Include a clear global value chain strategy in the Government's Business Growth Agenda.
• Ensure an explicit government focus on the promotion of enhanced GVC participation when allocating business assistance funding and science funding.
• Businesses to understand that the international value networks in which firms participate are more important than building domestic scale.
Denis McNamara is deputy chairman of NZPECC and John Ballingall is deputy chief executive of the NZIER. The reports are available at nzpecc.org.nz. NZPECC is a non-governmental organisation that works.
See the GVC ag and food processing report here:
See the GVC high-tech report here:
