Upgrading and Value Capture in Global Value Chains in Hungary: More Complex than What the Smile Curve Suggests

Andrea Szalavetz
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Andrea Szalavetz: Centre of Economic and Regional Studies of the Hungarian Academy of Sciences (MTA KRTK)

Chapter 6 in Foreign Direct Investment in Central and Eastern Europe, 2017, pp 127-150 from Palgrave Macmillan

Abstract: Abstract This chapter presents a conceptual model to explain why the upgrading of MNCs’ manufacturing subsidiaries fails to translate into additional value capture for upgraded actors. The model, a dynamic version of Mudambi’s (J Econ Geogr 8(5): 699–725, 2008) smile curve, integrates the concept of value capture. It is shown that over time, the shape of the original smile curve transforms. The curve shifts downwards, which represents the shrinking margins of actors. This effect can be countered through upgrading. The bottom part of the curve becomes flatter: this represents the commoditisation of business functions undertaken by upgraded subsidiaries. The sides become steeper as a result of changes in the specialisation of actors at the sides of the curve. The smile is transformed into a “bathtub.”

Keywords: Foreign Direct Investment; Host Country; Parent Company; Business Function; Lead Firm (search for similar items in EconPapers)
Date: 2017
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Persistent link: https://EconPapers.repec.org/RePEc:pal:stuchp:978-3-319-40496-7_6

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DOI: 10.1007/978-3-319-40496-7_6

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