Drost, S.

Vellema, S.

Wijk, J., van

English

Wageningen Yield 

DEVELOPMENT VALUE CHAINS MEET
BUSINESS SUPPLY CHAINS: 
The concept of Global Value Chains unraveled.
Value chain promoti on is considered a key element in the development strategy of corporati ons and other actors to 
promote sustainable development and poverty alleviati on. However, value chain is a complex and diﬃ  cult concept to 
grasp as it appears in a number of academic literature streams that have diﬀ erent theoreti cal backgrounds and focus. 
The diversity of forms and deﬁ niti ons are explored in this paper, where the authors make an overall disti ncti on between 
the strategic management perspecti ve and the development perspecti ve. They review added values and limitati ons of 
each approach. Since the concept is used by practi ti oners mostly via an eclecti c approach, it is suscepti ble to miscom-
municati on and misuse. The authors avoid this by explicitly opti ng for a public and pro-poor perspecti ve. 
Strategic management perspecti ve compared with development perspecti ve
The strategic management and development perspecti ves are the two most important/dominant schools of thought 
that govern the relati onship between value chains, corporati ons and development.   
   
The Strategic Management Perspecti ve
This perspecti ve has two primary focuses that are advocated by the two dominant streams of this literature: supply 
chain and Porters’ Value Chain. The focus of the supply chain theory is that the lead ﬁ rm should manage the exchange 
of informati on and the movement of goods by improving the logisti cs as a means to reduce transacti on costs and im-
prove eﬃ  ciency. Porter’s Value chain on the other hand focuses on how a ﬁ rm can organize its supply chain in order to 
outperform its competi tors. The focus is on value added to a product, however within an individual company. Goal is 
the maximizati on of proﬁ ts by controlling and designing the supply/value chain in a way that will be most beneﬁ cial for 
a lead or individual company.  
 Supply chain management Porters value Chain
Origin  Supply chain Management Supply chain management
Purpose It was developed to manage the total ﬂ ow  It was developed to create competi ti ve advantage for 
 of goods from suppliers to the ulti mate user. a ﬁ rm (through cost reducti on measures and 
  diﬀ erenti ati on)
Focus Improving logisti cal operati ons of the lead Improving competi ti ve advantage of individual ﬁ rms  
 ﬁ rm to increase eﬃ  ciency
Limitati on Unsuited for analyzing social and Focusing solely on one company and unsuited for 
 environment sustainability analyzing social and environmental sustainability
Development Perspecti ve
In contrast to the strategic management perspecti ve, commodity/value chain concepts from a development perspec-
ti ve are concerned with the whole process of value creati on from primary processing to consumpti on, instead of mainly 
focusing on the ‘retail side of the chain’. This perspecti ve incorporates the linkage between networks, households, coun-
tries and societi es in general into the analysis of the value chain. In additi on to this it analyses the diﬀ erent value add-
ing acti viti es of all parti es involved in the chain. Furthermore, the analysis shows how ﬁ nancial, material, and human 
resources are allocated and ﬂ ow within a chain as a result of power relati ons. This level of analysis oﬀ ers a new paradigm 
for practi ti oners as well as According to Bair (2009), the ‘global chains’ literature started with the world-systems tradi-
ti on of macro- and long-range historical analysis of commodity chains (Hopkins and Wallerstein 1986), was elaborated 
with the Global Commodity Chain (GCC) concept of Gereﬃ   (1994) and others within a politi cal economy of development 
perspecti ve, and was ﬁ nally developed into the Global Value Chain concept; clearly inspired by its GCC predecessor, 
however, also derived from other theoreti cal and disciplinary aﬃ  niti es (see next paragraph).
 Global commodity Chain Global Value Chain
Origins World System Theory World System Theory, Global Community Chain 
Added Value Developed a new paradigm to handle  Develop a model to analyze the governance of global
 distributi on of wealth along the value chain, value chains. Model was developed by analyzing the
 spurring development along the chain. levels of coordinati on, power asymmetry, capability 
  as well as the transacti on costs that exist between 
  partners. 
Focus Enti re length of the global supply chain with Create a bett er understanding of the dynamics of
 an emphasis on the eﬀ ect on countries the value chain. Including the importance of
  manufacturers in establishing the rules of the game
Limitati on Minimal deﬁ niti on of GCC; regulati ons and GVC is not comprehensive enough as value
 insti tuti onal factors have not been factored chains are embedded in broader relati onships. 
 into the theory; rigid classiﬁ cati on of chains
 
The Global Value Chain (GVC) concept originated out of the Global Commodity Chain (GCC). The GCC disti nguishes value 
chains on the basis of the power relati ons that exist between producers and buyers in primary and industrial sectors. The 
GCC identi ﬁ es the power structure within the chain, that determines how ﬁ nancial, material and human resources are 
allocated and ﬂ ow within it. In a buyer driven chain, such as fashion retailers, manufactures have decentralized produc-
ti on networks while in producer driven chains, the aerospace industry for example, the manufacturers have control and 
power within the chain.
 Global commodity Chain Global Value Chain
Origins World System Theory World System Theory, Global Community Chain 
Added Value Developed a new paradigm to handle Develop a model to analyze the governance of global
 distributi on of wealth along the value chain,   value chains. Model was developed by analyzing the
 spurring development along the chain. levels of coordinati on, power asymmetry, capability as
  well as the transacti on costs that exist between partners. 
Focus Enti re length of the global supply chain with an Create a bett er understanding of the dynamics of the 
 emphasis on the eﬀ ect on countries value chain. Including the importance of manufactur-
  ers in establishing the rules of the game 
Limitati on Minimal deﬁ niti on of GCC; regulati ons and GVC is not comprehensive enough as value chains are 
 insti tuti onal factors have not been factored embedded in broader relati onships. 
 into the theory; rigid classiﬁ cati on of chains
Building on the work of the GCC, the GVC concept identi ﬁ ed three criti cal variables that determine the structure of a 
value chain: the complexity of transacti ons, the ability to codify transacti ons, and the capabiliti es in the supply-base 
(e.g. highly knowledgeable users, such as manufacturers in the automobile industry). GVC increased the understanding 
of value chains by providing explanati ons for the existence of entry barriers and unequal access to markets as well as 
the uneven power and wealth distributi ons along the chain. The importance of the manufacturers in the global chain is 
emphasized by the GVC as manufactures can aﬀ ect the rules of the game due to their specializati on and their knowhow. 
The GVC also identi ﬁ ed ﬁ ve types of value chain governance that are: hierarchy, capti ve, relati onal, modular, and market. 
These types range from high to low levels of explicit coordinati on and power asymmetry and next to this, they range in 
transacti ons costs of switching to new partners (i.e. in a market type of governance the costs of switching to new part-
ners are low for both parti es). 
Figure 1: History of the GVC concept
Source: own compilati on
The practi ti oner approach to GVC
There is a need for developing country governments and donor agencies to bett er understand the dynamics of value 
chain integrati on, and to assess its risks and opportuniti es especially for poor persons in developing countries. Prac-
ti ti oners (development workers, trainers and government workers) are mainly concerned with the questi on of how 
economic actors can gain access to the skills, competences and supporti ng services required to parti cipate in global 
value chains. In general, practi ti oners construct an operati onal concept by synthesizing the diverse range of literature 
on supply/value chains. A reason for this eclecti c use of sources could be that NGO’s experience diﬃ  culti es in adopti ng 
both pro poor growth and commercial objecti ves, and therefore apply knowledge on supply/value chains from both 
development and business literature. 
The pro-poor growth strategy (practi ti oner approach) clearly disti nguishes itself from the supply chain management as 
the latt er aims at opti mizing the logisti cs of input sourcing and marketi ng in order to achieve proﬁ ts from the perspecti ve 
of a parti cular company. While the practi ti oners approach, GTZ (Deutsche Gesellschaft  für Technische Zusammenarbeit) 
for example develops elaborate models to promote economic development within a value chain perspecti ve. According 
to GTZ the value chain promoti ons harness market forces to achieve development goals. This concept evolved from a 
public perspecti ve and aims at economic growth as a means to achieve poverty alleviati on. 
Global Value Chains: Partnership resource center deﬁ niti on
Since the paper highlights the clearly disti ncti ve paths the value chain concept originates from, this can easily lead to 
miscommunicati on and misuse. Therefore, the authors wish to make the path and history of their concept of preference 
explicit. For their deﬁ niti on, they adopt insights of the Global Value Chain Initi ati ve, since it evolved from a public per-
specti ve and aims at economic growth as a means to achieve poverty alleviati on. In additi on, it is apt for studying social 
and environmental sustainability, governance and uneven power and wealth distributi ons along the chain.
Neo-
Liberalism
1990: 
GCC Gereﬃ  
World Systems
1980: CC
Hopkins & 
Wallerstein
2000: GVC
Gereﬃ   et al.
GPN
1985: Porter’s 
Value System
1982: SCM 
Oliver & Webber
1960 Filière
1960 Subsector
1960 1970 1980 1990 2000
1995 Global 
Sourcing/ 
oﬀ shoring
Sustainable pur-
chasing manage-
ment (SPM)
Deﬁ niti on used by the Partnership Resource Centre
This deﬁ niti on combines insights form the Global Value Chain Initi ati ve and GTZ. The Global Value Chain Initi ati ve de-
ﬁ nes a value chain as “the full range of acti viti es that ﬁ rms and workers do to bring a product from its concepti on to its 
end use and beyond. This includes acti viti es such as design, producti on, marketi ng, distributi on and support to the ﬁ nal 
consumer.” GTZ states that: “All operators adding value to a parti cular marketable product on its way from raw mate-
rial to the ﬁ nal consumer are considered part of the chain. Value chain promoti on harnesses market forces to achieve 
development goals. The GVC concept evolved from a public perspecti ve and aims at economic growth as a means to 
achieve poverty alleviati on. Value chains are not only an economic concept but also consti tute social systems in which 
people interact.”


Development value chains meet business supply chains: the concept of global value chains unraveled

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