Global Value Chains and the Competitiveness of Canadian Manufacturing SMEs
Academy of Taiwan Business Management Review, 10 (2), 82-92, 2014
10 Pages Posted: 16 Oct 2014
Date Written: September 2, 2014
The creation of global value chains (GVCs) has changed the dominant manufacturing paradigm, shifting focus away from producing complete goods and toward manufacturing activities or tasks that are organized along trans-border value chains called global production networks (GPNs). This paper describes the state of the art of Canadian small and medium size enterprises (SMEs) in the manufacturing sector, as well as their competitive strategic orientation to production in the context of the GVC framework. It presents an analysis of data from the manufacturing industry in Canada, the World Trade Organization (WTO), and the Organization for Economic Co-ordination and Development (OECD), and demonstrates that the competitiveness of Canadian manufacturing sectors in which Canada’s natural resources are not sufficient as raw materials is highly dependent on participation in GVCs. Through exploration of Canadian participation in GVCs, this study emphasizes their strategic importance for Canadian manufacturers. It concludes that the competitiveness of Canadian manufacturers depends on their integration into fragmented production chains within GVCs. It also finds that their overall manufacturing competitiveness depends on their participation in collaborative production networks involving both local production and foreign activities. Manufacturing SMEs need to focus on activities and tasks in which they have comparative advantages, and procure intermediate components from foreign sources through competitive market-based arrangements. This study recommends that re-industrialization policies be developed within a co-industrialization framework that includes complementary firms across geographic space, and that is not based on the “local vs. foreign” mindset of the past. The formulation of public policy should thus focus on facilitating exchanges among actors engaging in complementary activities and increasing collaboration among private sectors.
Keywords: Comparative Advantage, Global Value Chain, Canadian Manufacturing, SMEs, Intermediate Components
JEL Classification: J50
Suggested Citation: Suggested Citation