Abstract
The COVID-19 pandemic-related economic lockdowns and restrictions have caused socio-economic uncertainties in the world since 2020. The pandemic-induced economic shocks affected world trade, especially the reactions in fragile markets. As a result of the strict rules taken by the countries, the decrease in the supply of intermediate goods inputs used in industries worldwide, supply shock has caused global supply chains and economic problems to spread through supply chains. Due to the increase in demand exceeding the current supply and production capacity, the fragmented production system, which spread throughout the world, led to the risks related to global value chains (GVC). In this context, discussion of the uplift processes within the chain, which expresses the upgrading perspective, has come to the fore again. The solutions in chains, which are applied by industries in the pandemic process, emphasize the importance of backward and forward linkages in the chain.
TopIntroduction
The high rate of product fragmentation between industries and countries, integration of existing trading structure, processes related to production coordination such as Foreign Direct Investment (FDI), and infrastructure services has turned into a complex structure that has not been seen in previous periods in the World. The COVID-19 pandemic related economic lockdowns and restrictions caused socio-economic uncertainties in the World since March 2020. The pandemic-induced economic shocks affected World trade, especially the reactions in fragile markets. As a result of the strict rules taken by the countries, the decrease in the supply of intermediate goods inputs used in industries worldwide; supply shock has caused global supply chains and economic problems to spread through supply chains. Pandemic process, considering cost optimization, just-in-time production, and minimum stock keeping practices by firms, has revealed the sensitivity of international supply chains to such shocks. The process affects almost all countries in the world economically. Also, when outages occur in countries that are key suppliers of intermediate inputs, this effect will cover all firms in their supply chains (Gopinath, 2020).
The activities within the Global Value Chains (GVC), which is defined as a whole of activities and where all activities from product development to disposal after use are carried out by different locations and businesses, have also led to the negative impact of the activities within the GVC. Compared to traditional trade, GVC, fragmentation of manufacturing processes and individual task specialization in global locations have shifted the focus of competition from industries to tasks in manufacturing processes. GVC has the potential to develop and enhance the world economy through the management of fragmented value chains, global business problems, and forward-backward links. GVC is actively demonstrating its impact on economies by leading to productivity growth, competitiveness, international trade, and the rise of industries and countries along the value chain. GVC analyzes to local producers; provides important information on how to improve production processes, achieve stability and high quality, and speed up return processes (Humphrey and Schmitz, 2002).
The GVC analyzes are investigated the global industries from two different perspectives: top-down and bottom-up (Gereffi and Fernandez-Stark, 2016). The basic concept for a top-down view is “governance”, which examines the organization of global industries by connecting GVC leading firms and various supplier networks, while the main concept for a bottom-up view is “upgrading”, which emphasizes the strategies countries, regions, and firms use to maintain or improve their position in the global economy. (Gereffi, 2014). Upgrading processes, which means the integration of developing countries with deeper links to the world economy and their increasing activities within the GVC and transition to higher value-added production processes within the chain; provides an important motivation for increasing competitive pressures and maximizing profits. The upgrading process means moving from existing production activities to higher value-added activities (Milberg and Winkler, 2013) can occur in different forms: Reorganizing production processes to obtain more valuable outputs (Product Upgrading), increase the unit value by moving to more complex product lines (Process Upgrading), increase the content of skills by decreasing or increasing functions (Functional Upgrading) or transition to new productive activities (Upgrading in the Chain). Upgrading processes lead to the emergence of economic development for nations and development in many social, cultural, political, and environmental areas. Upgrading which is an important point in the transition to high profitability affects the competitiveness of firms in the national economy and contributes significantly to their transition from local to global (Humphrey and Schmitz, 2002). Forward GVC participation means the export of the products by the other countries and the sale by the other country and Backward GVC participation means countries' import into the chain by importing intermediate inputs in the production of products (OECD, 2013).
Key Terms in this Chapter
Backward Linkages: It refers to the backward connections of the actors involved in the GVC.
Forward Linkages: It refers to the forward connections of the actors involved in the GVC.
COVID-19: It is the abbreviation used for the virus that has been struggling during the pandemic process that has affected the whole world since the beginning of 2020.
Governance in Global Value Chains: It is the process that includes the relationships and interactions between the leading firms and other actors in the GVC.
Multi-National Firms: Businesses operating in different regions and/or locations outside of their main operating countries.
Upgrading in Global Value Chains: It means that the actors in the GVC move from low value-added production processes to higher value-added production processes.
Global Value Chains: It defines the processes that are spread all over the world and include all the stages from the first stage of production to the after consumption of all the actors involved in the production processes.