Global value chains in the age of uncertainty: advantages, vulnerabilities, and ways for enhancing resilience

In this paper, we seek to explain the fundamental vulnerability of global value chains (GVCs) to sudden shocks, as revealed by the COVID-19 pandemic crisis, and outline ways for enhancing their adaptability to the increased uncertainty at both conceptual and policy levels. We consider the concept an...

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Autores principales:	Daniel D. Katukov, Viacheslav E. Malygin
Formato:	article
Lenguaje:	EN
Publicado:	Immanuel Kant Baltic Federal University 2021
Materias:	global value chains covid-19 pandemic crisis uncertainty ripple effect economic resilience multinational enterprises disruption risk management Regional economics. Space in economics HT388
Acceso en línea:	https://doaj.org/article/5e9113fbb20c487e99ec11177dd16ce5
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spelling	oai:doaj.org-article:5e9113fbb20c487e99ec11177dd16ce52021-11-22T20:30:05ZGlobal value chains in the age of uncertainty: advantages, vulnerabilities, and ways for enhancing resilience10.5922/2079-8555-2021-3-52079-85552310-0524https://doaj.org/article/5e9113fbb20c487e99ec11177dd16ce52021-09-01T00:00:00Zhttps://journals.kantiana.ru/eng/baltic_region/4953/31214/https://doaj.org/toc/2079-8555https://doaj.org/toc/2310-0524In this paper, we seek to explain the fundamental vulnerability of global value chains (GVCs) to sudden shocks, as revealed by the COVID-19 pandemic crisis, and outline ways for enhancing their adaptability to the increased uncertainty at both conceptual and policy levels. We consider the concept and a typical multi-structural model of GVCs, highlighting the network complexity of the system of distributed production and trade in value added. Not only does this system bring competitive advantages to GVC partner countries, but also it entails risks of cascading production disruptions. We examine these risks by analysing the ripple effect of supply disruptions in GVCs when a sudden local shock can propagate globally through inter-firm supplier links, generating growing output losses across industries and economies. From this perspective, we describe the pandemic-induced breakdown in the global just-in-time supply system in spring 2020 and its role in the escalating global recession. In analysing the mechanisms of post-pandemic GVC adaptation to uncertainty, we look at the concept of economic resilience and properties of resilient systems (robustness, flexibility, redundancy, and dynamic sustainability). We scrutinise the supply chain resilience model used by leading MNEs (GVC organisers) in their disruption risk management at pre-disruption and post-disruption stages. We classify resilience strategies devised by MNEs after 2020 into three interrelated categories: namely, multi-structural GVC optimisation (diversification and relocation of suppliers), operational optimisation (building redundancy and production flexibility), and GVC digitalisation. We conclude by outlining windows of opportunity to improve international specialisation and growth patterns, which may open in the 2020s for developing economies, including Russia, due to the ongoing restructuring of GVCs and their global supplier networks. Daniel D. KatukovViacheslav E. MalyginImmanuel Kant Baltic Federal Universityarticleglobal value chainscovid-19 pandemic crisisuncertaintyripple effecteconomic resiliencemultinational enterprisesdisruption risk managementRegional economics. Space in economicsHT388ENBaltic Region, Vol 3, Iss 13, Pp 78-107 (2021)
institution	DOAJ
collection	DOAJ
language	EN
topic	global value chains covid-19 pandemic crisis uncertainty ripple effect economic resilience multinational enterprises disruption risk management Regional economics. Space in economics HT388
spellingShingle	global value chains covid-19 pandemic crisis uncertainty ripple effect economic resilience multinational enterprises disruption risk management Regional economics. Space in economics HT388 Daniel D. Katukov Viacheslav E. Malygin Global value chains in the age of uncertainty: advantages, vulnerabilities, and ways for enhancing resilience
description	In this paper, we seek to explain the fundamental vulnerability of global value chains (GVCs) to sudden shocks, as revealed by the COVID-19 pandemic crisis, and outline ways for enhancing their adaptability to the increased uncertainty at both conceptual and policy levels. We consider the concept and a typical multi-structural model of GVCs, highlighting the network complexity of the system of distributed production and trade in value added. Not only does this system bring competitive advantages to GVC partner countries, but also it entails risks of cascading production disruptions. We examine these risks by analysing the ripple effect of supply disruptions in GVCs when a sudden local shock can propagate globally through inter-firm supplier links, generating growing output losses across industries and economies. From this perspective, we describe the pandemic-induced breakdown in the global just-in-time supply system in spring 2020 and its role in the escalating global recession. In analysing the mechanisms of post-pandemic GVC adaptation to uncertainty, we look at the concept of economic resilience and properties of resilient systems (robustness, flexibility, redundancy, and dynamic sustainability). We scrutinise the supply chain resilience model used by leading MNEs (GVC organisers) in their disruption risk management at pre-disruption and post-disruption stages. We classify resilience strategies devised by MNEs after 2020 into three interrelated categories: namely, multi-structural GVC optimisation (diversification and relocation of suppliers), operational optimisation (building redundancy and production flexibility), and GVC digitalisation. We conclude by outlining windows of opportunity to improve international specialisation and growth patterns, which may open in the 2020s for developing economies, including Russia, due to the ongoing restructuring of GVCs and their global supplier networks.
format	article
author	Daniel D. Katukov Viacheslav E. Malygin
author_facet	Daniel D. Katukov Viacheslav E. Malygin
author_sort	Daniel D. Katukov
title	Global value chains in the age of uncertainty: advantages, vulnerabilities, and ways for enhancing resilience
title_short	Global value chains in the age of uncertainty: advantages, vulnerabilities, and ways for enhancing resilience
title_full	Global value chains in the age of uncertainty: advantages, vulnerabilities, and ways for enhancing resilience
title_fullStr	Global value chains in the age of uncertainty: advantages, vulnerabilities, and ways for enhancing resilience
title_full_unstemmed	Global value chains in the age of uncertainty: advantages, vulnerabilities, and ways for enhancing resilience
title_sort	global value chains in the age of uncertainty: advantages, vulnerabilities, and ways for enhancing resilience
publisher	Immanuel Kant Baltic Federal University
publishDate	2021
url	https://doaj.org/article/5e9113fbb20c487e99ec11177dd16ce5
work_keys_str_mv	AT danieldkatukov globalvaluechainsintheageofuncertaintyadvantagesvulnerabilitiesandwaysforenhancingresilience AT viacheslavemalygin globalvaluechainsintheageofuncertaintyadvantagesvulnerabilitiesandwaysforenhancingresilience
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Global value chains in the age of uncertainty: advantages, vulnerabilities, and ways for enhancing resilience

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