With the rise of global value chains (GVCs) and the tiered, internationally dispersed organization of production associated with GVCs, important questions have arisen about the conditions under which small suppliers and dependent contractors in supplier countries can create value and rise up from their position at the bottom of these chains (Carré, 2017; Bair and Gereffi, 2001; Gereffi 1999). A vast literature has arisen on the processes and prospects of upgrading within GVCs and production networks (Humphrey and Schmitz, 2002; Sturgeon et al., 2008; see Pipkin and Fuentes, 2017, for an excellent review). A vexing puzzle, however, persists about the substantial variation in the upgrading and learning outcomes among similarly situated firms located in the region, the same policy environment and even in the same sector. For example, I interviewed over forty component suppliers in the Indian automotive industry between 2000 and 2013, following about fifteen of them longitudinally through repeated interviews over time. During this period – a time of immense churn and growth in the Indian automotive sector with the arrival of many global auto-manufacturers and their suppliers into the country – some of the smallest suppliers in my sample thrived while others of similar size and in similar locations stagnated or went out of business.
Why do some firms succeed in upgrading and growing while other similarly situated firms are unable to do so? How and under what conditions can small suppliers in the lower reaches of GVCs and production networks learn to upgrade and improve their position within these value chains and networks?
This chapter contributes to the literature on upgrading among small producers in lower tiers of competitive GVCs. It explores the learning sequences associated with the upgrading pathways of suppliers that are usually regarded to be at risk of being trapped at the bottom of fast-moving GVCs (Barnes and Kaplinsky, 2000), or vulnerable to being displaced by more powerful, sophisticated and better connected top-tier suppliers of global original equipment manufacturers (OEMs) (Humphrey, 2003). The question of learning and upgrading among small suppliers is important because the vitality of an economy's manufacturing sector and its ability to compete and innovate in the face of global competition is shaped in part by the depth, quality and robustness of its locally rooted supply base.