This Project assess the importance of firm to firm relationships in the diffusion of skills and technology within the context of Global Value Chains. The Project uses the China Africa Cotton value chain as its primary case study
3. Objective of this Presentation
Define Global Value Chains
(GVC).
To outline how firm to firm
relationships contribute to
transfer of skills and
technology amongst firms.
Provide a Case study of how
a specific Global Value chain
has contributed to the
transfer of skill and
technology in the
production.
4. Global Value Chains
◦ A global value chain is the series of stages in the production of a product or
service to for sale to consumers. Each stage adds value, and at least two
stages are completed in different Countries.
◦ Global Value Chains contribute over 50% of all international trade.
◦ Global Value Chains are characterised by both hyperspecialization and firm
to firm relationships.
◦ In this presentation, the researcher will zone in on Firm to Firm relationships
and how they enhance GVC participation by the transfer of skills and
technology amongst firms.
5. Firm to Firm Relationships
◦ It is accepted that income grows when episodes of trade liberalization
boosts the diffusion of new technology.
◦ In contrast to standard trade, GVCs typically involve long term firm to firm
relationships (World Bank Report 2019:70). This relational nature of GVCs
makes them a powerful vehicle for technology transfer along the value
chain.
◦ Firms have a shared interest in specialising in specific tasks, exchanging
technology, and learning from each other. Firms acting in GVC’s are more
likely to work together because they are Interdependent. Firms are inclined
to share know- how and technology with suppliers because such sharing
boosts their own productivity and sales, leading to faster catch- up growth
across countries. This is contrary to traditional trade where firm produce
similar goods, in competition with one another.
◦ The strong firm to firm relationships in GVCs make firms particularly prone
to benefit from learning by importing and learning by exporting through
repeated interactions with highly productive firms.
◦ In a survey conducted by the World Bank, it was found that lead firms are
more willing to share knowledge and Know-how with suppliers if they
believe those benefits will not be passed on to other buyers.
6. Firm to Firm Relationships Continued
◦ Through firm to firm relationships, GVCs can also play an important role in on the job learning and employer- sponsored trading within GVCs can be an effective mechanism
for skill development, economic growth and wage increases.
◦ In the agricultural sector, long term relational contracts can also help improve connectivity, provided better access to technology and capital inputs that increase the quality
and yield of local producers.
8. Case Study China Africa Cotton
◦ China is both the largest consumer and importer of cotton in the world (Xiaoyang
2019:5).
◦ Since 2002, the Chinese textile industry has sourced 10% - 20% of its Cotton from Africa.
Much of this cotton is provided by the China Africa Cotton company (CAC).
◦ China Africa Cotton is a lead firm from China, which has established bases in Zambia,
Malawi, Mozambique and Zimbabwe. CAC conducts a number of functions which
include, seed research, assisting small holder African Cotton farmers by providing them
with seeds, pesticides; technical knowledge; and a market to sell their unprocessed
cotton, and cotton ginning.
◦ Once the ginning process has been completed, China Africa Cotton ships off cotton
fabric to Chinese textile companies, which go on to further process the cotton into
garments that are sold to clothing stores all over the world for retail. Cotton Africa also
makes use of the Cotton Seeds by producing Cotton Seed oils.
9. The Exchange of Skill and training in the Chinese
Africa Cotton Value Chain
◦ China Africa Cotton contracts small holders farmers in Zambia, Malawi and Zimbabwe to the
grow cotton. This relationship means that the success of China Africa Cotton is tethered to that
of the small holder farmers. Therefore, China Africa Cotton has an interest in making sure that,
small holder farmers have access to the requisite training and technology to enhance their
yields.
◦ During the growing season from November to May, China Africa Cotton’s buyers and Regional
Managers occasionally visit farmers to provide advice to new farmers on how to weed, how to
seed and how to use pesticide when crops are growing. Buyers instruct farmers on matters
related to crop choice, timing of seeding and land preparation methods.
◦ China Africa Cotton participates in a Farmer Field School implemented by the Zambia Cotton
Development Trust. In 2014, the Farmer Field School program trained 58 Zambian agricultural
facilitators from seven companies. China Africa Cotton sent 5 facilitators, including 3 assistant
managers and two route managers to take part in the training. (Xiaoyang 2019: 15).
10. The Exchange of Skill and training in the Chinese
Africa Cotton Value Chain Continued
◦ Since 2009, China Africa Cotton has sent dozens of Zambians, including both its employees and officials, in several groups to train in China. The CAC itself has only financed
one of these groups, a trip in 2012 to reward employees after a particularly good harvest.
11. The Exchange of Development Technology in the
Chinese Africa Cotton Value Chain
◦ The China Africa Cotton company is also involved in research aimed at
enhancing seed quality to boost farmer yields.
◦ The China Africa Cotton Company is the first firm to successfully introduce
acid-delinted Seeds to Zambia and Malawi.
12. Conclusion
◦ Through stronger firm to firm relationships, it can be said that global value chains are an effective means for firms to share both skills and technology with one another.
Global Value Chains promote a general spirit of cooperation as opposed to competition in the course of international Trade. The China Africa Cotton Value chain illustrates
just firms from different countries work together by sharing technology and know how within a value chain.
