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.