Outward Foreign Direct Investment and Upgrading by Emerging Market Firms in Global Value Chains, Studies in Trade, Investment and Innovation No. 94

This report analyzes how emerging market firms upgrade their capabilities to become leading global competitors, suggesting the use of foreign investments as an upgrading mechanism in global value chains. The report introduces a typology of global value chain upgrading strategies based on two dimensions: the type of global value chain expansion followed by the emerging market firm (repetition or extension), and the governance relationships between emerging market firms and advanced country lead firms (collaborators or autonomous). This results in four upgrading strategies, dependent, replicative, breakaway, and independent which are illustrated by analyzing the global value chains of four leading Thai multinationals. The report concludes with a discussion of government policy supporting each of the upgrading strategies, suggesting a rethinking and integration of existing and new policies that promote exports, inward foreign direct investment, and outward foreign direct investment within the general driver of facilitating emerging market firms’ upgrading.