Many local firms in sub-Saharan African countries are failing to enter and upgrade in new manufacturing and agribusiness export sectors.
A new study argues that we need to look more closely at the costly, risky, and uncertain firm-level processes of building capabilities in order to understand this challenge. However, local firm agency is constrained and has to be situated in asymmetric structures that are determined by transnational interfirm relations in global value chains (GVCs) as well as the country and region in which local firms are embedded.
The article presents a new framework for researching how firms build capabilities in GVCs, and demonstrates how it can be applied using the cases of apparel and floriculture export sectors in Ethiopia, Kenya, and Madagascar.
The cases show that firms build specific capabilities linked to export strategies, leading to uneven capability-building, specific upgrading paths, and value capture trajectories. Variations in local firms’ export strategies and success with those strategies are explained by differences in the financial capital, tacit knowledge, and social networks that they can leverage in building capabilities. The nature and extent of these intrafirm resources, especially in the early period of export industry development, are shaped by shared networks between local and foreign supplier firms, regional proximity to existing supplier countries, strategic interests of global buyers, and government industrial policy.