Spatial Re-Localisation in Global Value Chains and Global Production Networks: Path Creation Perspective

Abstract

The article provides insights into the drivers of spatial re-localisation within the production networks of the solar photovoltaic (PV) industry. In doing so, we combine the perspectives of Global Value Chain (GVC), Global Production Network (GPN) and institutional path creation perspective to analyse the relocation and upgrading of multinational corporations (MNCs) in Malaysia using interviews and trade data. Our findings show that institutional path creation has helped to promote the completeness of the entire solar PV value chain in Malaysia, with the state actively intervening and creating new pathways by learning from the experience of the electronics industry, especially in the pre-foundation phase. Nevertheless, the path creation is also limited in that they have only been able to open windows of investment and trade opportunities within the different segments of the GVC without doing much to promote technological learning and spillover effects as the governance structure of the value chain is integrated. We find that other factors are less helpful in promoting local spillovers – exportoriented policies, energy policies and domestic industry dynamics due to lack of policy coordination. The results draw attention to some important issues that deserve closer consideration and contribute to the theoretical discussion within the GVC and GPN literature. First, path creation occurs at both levels - at the level of institutions and at the level of firms’ strategic decisions. Second, institutional path creation acts as exogenous shocks to firm path creation leading to different strategic choices, and the two reinforce each other. In other words, we have shown the complexity of path creation in the context of GVC and GPN. Third, institutional path creation is subject to dynamic coordination among agencies, without which path formation is constrained.