Participation in Global Value Chains as a Vehicle for SME Upgrading: A Literature Review

This document is part of a new series on “Small Enterprise Clusters and Global Value Chains” that forms part of the set of Small EnterprisE Development (SEED) Working Papers. This area of SEED’s work explicitly addresses the issue of isolation among individual small enterprises, which is frequently identified as one of the major factors constraining their growth, competitiveness and potential for job creation.

SEED’s work in its theme of Market Access is based on the premise that small enterprises can grow and become competitive economic ventures when they have clear and well-developed strategies to target and access quality market opportunities for selling their outputs. An important aspect in the strategic development of these small enterprises is a deeper and more nuanced understanding of the dynamic nature of market access, and furthermore, how this process shapes where market opportunities arise or become restricted.

The present study in this series draws upon an extensive literature review to assess the prospects for SMEs in developing countries to compete and upgrade in global systems of production. In particular, the author considers whether global value chains may serve as a viable, and sustainable, vehicle for this type of upgrading, especially considering that SMEs in developing countries are found mostly concentrated in low value-added areas of production and frequently rely upon low labour costs as a key competitive strategy.