TMJC 2025 J1H2 C1 Lecture 3 Global Production Network

1 WHAT IS THE GLOBAL PRODUCTION NETWORK (GPN)? ***GPNs refer to the extensive webs of intra-, inter- and extra-firm connections through which commodities are produced, distributed, sold and consumed. These networks are geographically extensive and functionally integrated across national boundaries. GPNs are usually network system coordinated and controlled by a globally significant TNCs. These TNCs are lead firms that are key shapers of the global economy; they are market leaders in terms of their brand names, technology, product/services, and marketing capabilities.’ The production of products used to be viewed simply via a global value/ production chain (Fig. 2). However, in a GPN, the complexity of the production of goods and services are captured through the production circuit whereby processes of inputs, transformation, distribution, consumption are involved An example of a GPN e.g. Simplified Nike version Hence GPNs provide an analytical framework focusing on the roles of economic actors in the establishment of contractual and technological linkages between global brand name products/ service providers and their strategic partners/ suppliers in order to reveal the uneven distribution of value capture and retention between the countries of production and consumption. Higher 2 (9173) Cluster 1: Development, Economy and Environment TMJC Cluster 1 Lecture 3 Global Production Networks 2025

2 HOW DOES A GPN WORK? There are intra-firm networks, inter-firm and extra-firm networks within a GPN. Intra-firm networks refer to processes in the functioning of a TNC which is controlled by the TNC itself. Such vertical integration involves internal division of labour within a TNC, usually in the control and coordination of different business functions. It involves mainly the corporate and regional HQ functions (financial role and processor and transmitters of information), as well as, R&D facilities (who play a critical role in the survival of firms) of a TNC. The spatial organisation of intra-firm networks are as follows: • Concentrated in the home countries • Location criteria: access to skilled labour; sources of scientific development and appropriate infrastructure • Recent trend towards internationalization of R&D - a strategy to gain new market - internationalization of labour market for R&D Inter-firm networks refer to processes in the functioning of a TNC which is controlled by other TNCs. Such horizontal integration usually involves subcontracting, outsourcing, suppliers and also formation of strategic partners. Inter-firms networks are important for the TNCs as: 1. They are a means to rationalise the production of goods and services for profit maximisation. 2. They also allow the TNCs to better focus on its core function of coordination and control of its business, as well as, R&D whereby innovation of its products and services are required to constantly cater to the needs of its consumers. 3. Risks of the production and i