A Comparative Study of the Acquisition of Branding Capabilities in Domestic and Global Value Chains
The most dramatic change in the global economy over the last 30 years has been the shift of production capabilities from developed countries to East Asian developing countries. China, in particular, has come to be seen as the ‘Factory of the World’. Previous research on China’s industrialisation and internationalisation strategies has typically focused on the trajectory from basic manufacturing to more technologically advanced production. This research innovates by focusing on another way in which Chinese firms can capture value in the global economy: branding. Is China moving beyond manufacturing and also becoming a major power in branding? If yes, to what extent and how?
These questions are critical for the distribution of gains in the global economy. Marketing and branding capabilities are associated with higher incomes and long-term global competitiveness. The development of strong Chinese branding capabilities could mean that firms from developed countries suffer substantial losses as Chinese firms move from manufacturing to full branded production for developed markets whilst maintaining a strong cost advantage.
How can firms from developing countries make the transition from production to higher-value added capabilities such as those needed for branding? One view assumes that such capabilities are acquired in the course of exporting: the key message of the ‘Learning by Exporting’ paradigm is that exporting provides a superior way for developing country firms to acquire capabilities to become globally competitive. There is another view which identifies the conflict between manufacturing firms and the lead firms (clients) which control higher value activities like branding. Dr Lizbeth Navas-Aleman has demonstrated in previous work that where producers have branding capabilities, these were initially acquired by producing for the home market and then ‘leveraged’ to be used in exporting.
This trajectory is very different from ‘learning-by-exporting’. Dr Navas-Aleman highlights that the manufacturing capacity of developing countries for global markets has grown enormously but that their marketing capacity remains low. There is a discontinuity in the learning process but the combination of factors needed to overcome this is unclear.
In collaboration with the Institute of World Economy at the Shanghai Academy of Social Sciences (SASS), this research explores these issues for the two most exported industries in China: garments and home appliances. Private sector and policy users will be involved through a stakeholder forum as part of an innovative user engagement strategy to link the business and development communities.