Enhancing the Role of SMEs in Global Value Chains
The New Configuration and Management Techniques of Value Chains of Global Enterprises and the Resulting Consequences for Small and Medium-Sized Enterprises in North and South
KeywordsEnterprises - Globalisation
At the invitation of the Japanese Government, the OECD Global Conference on Enhancing the Role of SMEs in Global Value Chains (GVC) took place in Tokyo on 31 May- 1 June 2007. Convened within the framework of the OECD Bologna Process on SME and Entrepreneurship Policies, the meeting brought together members of the international business community, including SMEs, international organisations, and senior government representatives from members of the OECD, as well as non-member economies.
The business challenges of the acceleration of globalisation, aided by rapid developments in information and communication technologies, improved transport facilities, behind the border regulatory reform, and tariff reductions- affect SMEs and large multinational enterprises differently. The current phase of globalisation, characterised by the globalisation of production processes, has required important modifications in the relationships among partners throughout the value chain.
Participation in global value chains can bring stability to SMEs and allow them to increase productivity and to expand their business. This is often accomplished by the upgrading of their technological and human capital, as a result of their greater exposure and facilitated access to information, new business practices and more advanced technologies. Co-operation with a network of upstream and downstream partners can enhance a firm’s status, information flows and learning possibilities and increases the chances of success of small firms in the value chain.
However, SMEs’ involvement in value chains usually entails greater demands on their managerial and financial resources, and pressures on their ability to upgrade, to innovate and to protect in-house technology. SMEs may be limited by their inability to undertake R&D; activities and training of personnel, and to comply with the growing number of requirements of product quality standards demanded by others in the GVC. Insufficient working capital can also be a barrier to SME participation in global value chains, in terms of their ability to upgrade technologies and services. Cash-flow can also be affected adversely through delayed payments from international partners. Moreover, in order to upgrade its position in the value chain, a small firm may need to take-on a larger and more complex set of tasks: for example, in addition to manufacturing a product or providing a service, it may involve contributing to the product development, organising and monitoring a network of sub-suppliers, implementing internal systems of quality control and assuring compliance to an increasing set of standards, and ensuring delivery and quality at competitive costs.
The Conference found that governments, multinational enterprises, business associations and international institutions could play a significantly greater role in assisting SMEs to enter and to rise to the challenges of active participation in global value chains and so recommended this ACTION STATEMENT
Enhancing the Role of SMEs in Global Value Chains: OECD Background report
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Enhancing the Role of SMEs in Global Value Chains: OECD Tokyo Statement
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Expert Meeting on "Enhancing the Participation of Small and Medium-Sized Enterprise in Global Value Chains" – Palais des Nations, Geneva, 18-19 October 2007, 10:00 am to 6:00 pm
A two-day expert meeting on the topic of a GIAN-funded research project "Enhancing the Participation of Small and...