Inter-firm relationships in global value chains: trends in chain governance and their policy implications

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Much of international trade is coordinated by the lead firms of Global Value Chains (GVCs) and regulated through global standards. The way in which this global governance is exercised has a significant impact on the organisation of Small and Medium-sized Enterprises (SME) clusters and their upgrading opportunities. This paper is particularly concerned with the global governance structures themselves – i.e. with GVCs, global standards and their interaction. The objective of the paper is to understand this public?private institutional context for international trade. To this end, the paper looks at the following questions: What is chain governance? When does it arise? How do chain governance and global standards interact? What are the likely trends in the global governance of value chains? What is the policy relevance of these governance structures? The paper sums up the literature on local industrial development and emphasises that understanding the changes at a local level requires an understanding of the changes in global governance.