Enhancing the Role of SMEs in Global Value Chains Tokyo, 31 May - 1 June 2007 OECD BACKGROUND REPORT OECD国際カンファレンス 「グローバル・バリュー・チェーンにおける中小企業の役割強化」 ２００７年５月３１日（木）－ ６月１日（金） FOREWORD The OECD Working Party on SMEs and Entrepreneurship (WPSMEE) study on Enhancing the Role of SMEs in Global Value Chains focuses on the effects of the globalisation of value chains on small and medium-sized enterprises. Originating from a proposal made by the Swiss authorities, this study was taken up in the 2004 Istanbul Ministerial Declaration1 where Ministers invited the OECD to consider “enabling a better understanding of international value chains and the way in which SMEs can benefits from them”. It has contributed to work on global value chains carried out by the Directorate for Science, Technology and Industry and submitted to the 2007 OECD Ministerial Conference Meeting as part of the background material. The study was partly funded by the Geneva International Academic Network (GIAN/RUIG), the Swiss State Secretariat for Economic Affairs (SECO) and the Japanese Ministry of Economy, Trade and Industry (METI). Several OECD members and non-member economies, participating in the OECD Bologna Process on SME and Entrepreneurship Policies, contributed to the project by undertaking case studies on specific industrial sectors. A Steering Group composed of representatives from Australia, France, Italy, Japan, New Zealand (Chair), the United States and the World Intellectual Property Organisation (WIPO) offered guidance throughout the study. This document was prepared by Mme Mariarosa Lunati, SME and Entrepreneurship Division of the OECD Centre for Entrepreneurship, SMEs and Local Development (CFE), in co-operation with a Swiss research team led by Prof. Paul H. Dembinski (University of Geneva and University of Fribourg) and Ms. Fulvia Farinelli, Investment and Enterprise Competitiveness Branch, United Nations Conference on Trade and Development (UNCTAD). Mme Marie-Florence Estimé, CFE Deputy Director, supervised the preparation of the study. Mr. Alain Dupeyras, Tourism Unit of the SME and Entrepreneurship Division, developed input related to tourism issues, while Mr. Toru Ueno, SME and Entrepreneurship Division, supported the preparation of the Japanese input. Ms. Brynn Deprey and Mme Elsie Lotthé, SME and Entrepreneurship Division, provided research assistance and secretarial support respectively. 1. The Istanbul Ministerial Declaration on Fostering the Growth of Innovative and Internationally Competitive SMEs, OECD 2004. 1 TABLE OF CONTENTS FOREWORD ................................................................................................................................................... 1 EXECUTIVE SUMMARY ............................................................................................................................. 4 INTRODUCTION ........................................................................................................................................... 9 1.1. The notion of value chain ............................................................................................................ 9 1.2. Methodology of the study .......................................................................................................... 11 2. PRODUCTION IN GLOBAL VALUE CHAINS ..................................................................................... 13 2.1. The phenomenon and its drivers ................................................................................................ 13 2.2. Opportunities for SMEs ............................................................................................................. 15 2.3. Challenges for SMEs ................................................................................................................. 21 3. PATTERNS OF GLOBALISATION IN FIVE INDUSTRIAL SECTORS ............................................. 25 3.1. Globalisation issues in five industries ....................................................................................... 25 3.2. Different configurations of value chains ................................................................................... 36 4. SMES AND GLOBAL VALUE CHAINS: CASE STUDIES FINDINGS ............................................... 41 4.1. Awareness and understanding of global value chains ............................................................... 41 4.2. Co-operation in global value chains .......................................................................................... 46 4.3. Technology, innovation, standards and IPRs ............................................................................ 53 4.4. Perceived benefits of SMEs‟ participation in global value chains ............................................ 58 4.5. The role of government ............................................................................................................. 61 5. CONCLUSIONS AND POLICY RECOMMENDATIONS..................................................................... 65 BIBLIOGRAPHY ......................................................................................................................................... 68 ANNEX I. CASE STUDIES: COVERAGE, MAIN FINDINGS AND RESEARCH TEAMS .................. 71 ANNEX II. ASSESSING THE PRODUCTIVITY OF LARGE, LISTED ENTERPRISES ........................ 80 2 Tables Table 1. Distribution of case studies by industry and country ............................................................. 12 Table 2. Key attributes of the five industries analysed ........................................................................ 39 Table 3. SMEs‟ awareness and understanding of the value chain ....................................................... 43 Table 4. Co-operation within the value chain ...................................................................................... 49 Table 5. Technology, standards and IPRs within the value chain ....................................................... 56 Table 6. Perceived benefits of SMEs‟ participation in global value chains ........................................ 59 Table 7. Policy issues from the field work .......................................................................................... 62 Figures Figure 1. Obstacles to Internationalisation as perceived by SMEs ....................................................... 15 Figure 2. Changes in subcontracting structure, Japan .......................................................................... 17 Figure 3. SMEs in formal and non-formal co-operation ....................................................................... 19 Figure 4. National or foreign SMEs as important partners in cooperation ........................................... 20 Figure 5. Proportion of Japanese companies with overseas subsidiaries .............................................. 20 Figure 6. Software value chain (personal computer) ............................................................................ 30 Figure 7. An example of value network for the tourism industry ......................................................... 33 Figure 8. Value chain for motion pictures ............................................................................................ 35 Boxes Box 1. Value chain analysis: A tool for understanding competitiveness ................................................... 10 Box 2. Outsourcing and subcontracting ..................................................................................................... 14 Box 3. Subcontractors ................................................................................................................................ 17 Box 4. Electronic marketplaces: the case of Covisint ................................................................................ 18 Box 5. Providing financing to small suppliers ........................................................................................... 22 Box 6. Facing the challenge of global value chains: SMEs in developing ................................................ 24 Box 7. Analysing an enterprise‟s key attributes ........................................................................................ 42 Box 8. How Egyptian suppliers are serving Microsoft globally ................................................................ 42 Box 9. Co-operation between first and second tier suppliers of VolksWagen in Mexico ......................... 47 Box 10. Boosting the competitiveness of the automotive parts industry in Chinese Taipei ...................... 47 Box 11. SME alliances in the Austrian tourism sector .............................................................................. 48 Box 12. Funding innovative SMEs in the Polish tourism sector ............................................................... 55 Box 13. Internet usage in the Australian tourism sector ............................................................................ 55 Box 14. Hovering on the edge of the value chain of Toyota South-Africa................................................ 58 Box 15. Protecting IPRs in the cinema industry: the case of Nigeria ........................................................ 61 Box 16. How are benefits from productivity growth distributed between firms?...................................... 83 3 ENHANCING THE ROLE OF SMEs IN GLOBAL VALUE CHAINS EXECUTIVE SUMMARY 1. The globalisation of production has today reached an unprecedented extent, with the production