October 2012 Research Reports | 383 | Robert Stehrer, Marcin Borowiecki, Bernhard Dachs, Doris Hanzl-Weiss, Steffen Kinkel, Johannes Pöschl, Magdolna Sass, Thomas Christian Schmall and Andrea Szalavetz Global Value Chains and the EU Industry Robert Stehrer (coordinator of the study) is Deputy Director of Research at the Vienna Institute for International Economic Studies (wiiw). Marcin Borowiecki is researcher at AIT Austrian Institute of Technology, Vienna. Bernhard Dach is Senior Scien- tist at AIT. Steffen Kinkel is Head of the Compe- tence Centre Industrial and Service Innovations at the Fraunhofer Institute for Systems and Innova- tion Research (ISI), Karlsruhe, Germany. Thomas Christian Schmall is researcher at Fraunhofer ISI. Magdolna Sass is Senior Research Fellow at the Research Centre for Economic and Regional Studies (RCERS) of the Hungarian Academy of Sciences Robert Stehrer, Marcin (HAS), Budapest, Hungary. Andrea Szalavaetz is Borowiecki, Bernhard Dachs, researcher at RCERS. Doris Hanzl-Weiss, Steffen This report is based on the Background Study for Kinkel, Johannes Pöschl, the European Competitiveness Report 2012. The Magdolna Sass, Thomas European Commission, DG Enterprise and Industry Christian Schmall and paid for the study (Framework Service Contract no. Andrea Szalavetz ENTR/2009/033) in the amount of EUR 162,952. The opinions expressed are those of the authors Global Value Chains and only and do not represent the Commission’s offi- cial position. the EU Industry Contents Summary .................................................................................................................................. i 1. Introduction ...................................................................................................................... 1 2. A review of the related literature ...................................................................................... 3 2.1 Introduction ............................................................................................................. 3 2.2 The GVC framework of analysis and ‘trade in tasks’ ............................................ 5 2.3 Impact of captive offshoring and offshore outsourcing .......................................... 9 2.4 The changing specialisation of advanced economy actors in Baldwinian old and new paradigms ................................................................. 25 2.5 Patterns of Europe’s GVC specialisation............................................................. 29 2.6 Crisis and GVCs ................................................................................................... 32 3. Changes in industries’ value chains since 1995 ........................................................... 36 3.1 Introduction ........................................................................................................... 36 3.2 The World Input-Output Database data .............................................................. 36 3.3 A global account of the selected industries ......................................................... 38 3.4 International linkages ........................................................................................... 41 3.5 Offshoring and the foreign content of exports ..................................................... 50 3.6 Offshoring and energy efficiency ......................................................................... 63 4. Effects of the economic crisis on changes in trade patterns and potential disruptions to international supply chains ................................................ 69 4.1 Introduction ........................................................................................................... 69 4.2 The trade collapse and after ................................................................................ 70 4.3 A decomposition of the trade collapse ................................................................. 81 5. Impact of long-term and crisis-related value chain dynamics on the competitiveness of EU firms and their internationalisation ................................ 85 5.1 Introduction ........................................................................................................... 85 5.2 Database .............................................................................................................. 87 5.3 Frequency of production offshoring ..................................................................... 89 5.4 Target regions of production offshoring ............................................................... 95 5.5 Main motives for production offshoring ..............................................................100 5.6 Characteristics of offshoring firms .....................................................................104 5.7 Offshoring of support business functions .......................................................... 110 6. SUMMARY ...................................................................................................................112 7. References ...................................................................................................................116 Appendix Tables ..................................................................................................................130 List of Tables and Figures Table 2.3.1 Understanding intra-firm or captive offshoring, outsourcing and offshore outsourcing ........................................................................................... 10 Table 3.2.1 Outline of world input-output table ............................................................................. 38 Table 3.3.1 Gross output and value-added shares in world for selected industries, 2009, in % 39 Table 3.3.2 Gross output and value-added shares in total manufacturing, 2009, in % .............. 39 Table 3.3.3 Shares of intermediate inputs in gross output, 1995–2009, in % ............................. 40 Table 3.4.1 Backward and forward linkages, by region, 2007 ..................................................... 46 Table 3.5.1 Vertical integration by partner .................................................................................... 57 Table 3.5.2 Vertical integration measures by industry, 1995–2009............................................. 60 Table 3.5.3 Change in shares by partner in percentage points, 1995–2007 and 2007–09 ....... 62 Table 3.6.1 Foreign energy use (in TJ) by unit of exports (USD million), 1995–2009 ................ 65 Table 3.6.2 Energy use by partner, 1995–2009 ........................................................................... 67 Table 3.6.3 Index of energy use and foreign share, 1995–2009 ................................................. 68 Table 4.2.1 Exports of major economies in USD billion and share of partners in total trade (2010) .................................................................................................... 73 Table 4.2.2 Imports of major economies in USD billion and share of partners in total trade (2010) .................................................................................................... 74 Table 4.2.3 EU-27 imports by partner, industry and use category: import share of partner in 2007, annual growth 2005–07 and 2008–10 (in %) ............................. 82 Table 4.3.1 Changes in export 2007–10 relative to 2007 ............................................................ 84 Table 4.3.2 Changes in import 2007–10 relative to 2007 ............................................................ 85 Table 5.2.1 Sample of surveyed firms, by firm size, country and sector, 2006 and 2009 .......... 88 Table 5.5.1 Probit regression results for destination region, by reasons for offshoring, 2006 and 2009 ......................................................................................................... 107 Table 5.6.1 Probit regression on the probability of being an offshoring firm, 2006–09 ............. 108 Table 5.6.2 Probit regression on the probability of being an offshoring firm, 2009 ................... 109 Table A.3.2.1 WIOD industry list .................................................................................................... 130 Table A.3.2.2 WIOD country list ..................................................................................................... 131 Table A.3.4.1 Linkages for chemicals (NACE 24, DG) .................................................................. 132 Table A.3.4.2 Linkages for machinery (NACE 29, DK) ................................................................. 133 Table A.3.4.3 Linkages for electrical and optical equipment (NACE 30–33, DL) ......................... 134 Table A.3.4.4 Linkages for transport equipment (NACE 34–35, DM) ........................................... 135 Table A.3.5.1 Vertical integration measures 1995–2009, NACE DG ........................................... 136 Table A.3.5.2 Vertical integration measures 1995–2009, NACE DK ............................................ 137 Table A.3.5.3 Vertical integration measures 1995–2009, NACE DL ............................................ 138 Table A.3.5.4 Vertical integration measures 1995–2009, NACE DM ........................................... 139 Table A.3.6.1 Energy use (TJ) by unit of exports (USD million), 1995–2009 ............................... 140 Table A.3.6.2 Energy use (TJ) by unit of exports (USD million) in NACE DG, 1995–2009 ......... 141 Table A.3.6.3 Energy use (TJ) by unit of exports (USD million) in NACE