Technological Capabilities, Upgrading, and Value Capture in Global Value Chains: Local Apparel and Floriculture Firms in Sub-Saharan Africa

Figures & data

Table 1 General Technological Capabilities Matrix

		Categories of Technological Capabilities
		Investment	Production Process	Product	End Market	Linkages
Functions in global value chain	Function 1 (basic)*
	Function 2 (intermediate)*
	Function 3 (advanced)*

* The elaboration of basic, intermediate, and advanced functions can include as many rows as necessary to capture real-world patterns of upgrading within specific GVCs.

Table 2 Average Local Apparel and Floriculture Export Firm Capabilities in Ethiopia, Kenya, and Madagascar*

Function	No. of Local Firms	Investment Capabilities	Product Capabilities	Production Capabilities	End Market Capabilities	Linkage Capabilities	No. of Local Firms	Investment Capabilities	Product Capabilities	Production Capabilities	End-Market Capabilities	Linkage Capabilities
APPAREL	ETHIOPIA						MADAGASCAR
CMT-subcontracting							7
CMT	6						2
FOB	3						9
FOB-textile	3						2
ODM							3
FLORICULTURE	ETHIOPIA						KENYA
GC							2
GCP	11						13
FDB							8
BNV							2

Source: Authors.

* Light grey shading indicates low average capabilities across all firms operating in that function, darker grey shading indicates medium average capabilities, and the darkest grey shading indicates high average capabilities. The average score for each capability category was calculated based on the firm-level average per indicator.

Table 3 Factors Explaining Variation in Local Firms’ Capability-Building

	GVC Dynamics	Foreign Firms and Regional Context	National Industrial Policies	Local Supplier Firm Resources
Apparel
Ethiopia	Some US and EU buyers with an Africa sourcing strategy.	Very few foreign firms in the period 2005–15. Very limited linkages to/spillovers from regional apparel exporting country.	Industrial policy incentivized local and foreign firm investments.* Protected domestic market.	Little manufacturing experience. Diaspora with no industry experience and limited social networks to buyers and foreign suppliers.
Madagascar	Local firms specialized in niche product segments based on relationships with buyers and specialized complementary assets. Smaller European buyers, especially from France.	Territorial and network embeddedness of Mauritian and French foreign firms. Regional proximity and linkages to/spillovers from Mauritius’s mature apparel export industry.	No industrial policy; only creation of export processing zones.	European and Indian origin diaspora firms with networks and ability to access finance and knowledge. High-capability diaspora firms support indigenous Malagasy firms. Leveraged tradition of handiwork artisanal skills in the country.
Floriculture
Ethiopia	Dutch auction minimum price. Dutch development assistance provided knowledge. Unpackers at the Dutch auction provided learning support.	Linkages between farm managers in foreign and local firms. Regional proximity and linkages to/spillovers from Kenya’s mature floriculture export industry.	Industrial policy incentivized local and foreign firm investments. Creation of industry-specific facilities and airport infrastructure.	Limited production experience. Flower firms part of diversified business groups; focus on overall businesses and foreign exchange earnings.
Kenya	Dutch auction and Dutch development assistance provided knowledge. European buyers support in early stage of industry because interested in creating new suppliers.	Presence of foreign firms aided learning through spillovers such as imitation, foreign experts, developing local skilled labor. No regional mature floriculture export industry.	Industrial policy incentivized local and foreign firm investments in the early stage of the industry. Cofinanced industry-specific facilities and airport infrastructure, together with investors and development aid.	European and Indian-origin diaspora firms with networks and ability to access finance and knowledge. Black Kenyans use connections to political elite or foreign firms to leverage resources and contacts to buyers.

Source: Authors.

*Industrial policy to create apparel-specific industrial parks in which local firms could participate were not available until 2016, which is after the firm survey, and by 2020 there were very few local firms located in these parks.

Table 4 Export Strategies, Technological Capabilities, and Value Capture of Ethiopian-Owned Floriculture Firms

Firms	Export Strategy	TC Score	Price*	Profit/Loss
E-Rose	Only Dutch auction deepening	MHMM (med-high)	5	profit
F-Rose	Only Dutch auction deepening	LMMM (med-minus)	4	profit
M-Rose	Only Dutch auction deepening	LLMM (low-med)	4	loss
G-Rose	Only direct sales to lower-end markets	LLLM (low)	NA	profit
D-Rose	Only direct sales to lower- and higher-end markets	LMMH (mixed)	3	profit
A-Rose	Largely Dutch auction but diversifying to lower- and higher-end markets through direct sales	MMMM (medium)	1	loss
L-Rose	Largely Dutch auction but diversifying to lower- and higher-end markets through direct sales	MMMM (medium)	3	breakeven
C-Rose	Largely Dutch auction but diversifying to lower- and higher-end markets through direct sales	LMMM (med-minus)	2	profit
K-Rose	Largely Dutch auction but diversifying to lower- and higher-end markets through direct sales	MHMM (med-high)	3	loss
J-Rose	Largely Dutch auction but diversifying to lower- and higher-end markets through direct sales	MMML (med-minus)	1	loss
B-Rose	Dutch auction and direct sales to low-end markets	LLLL (low)	1	loss

Source: Authors, based on firm survey scoring exercise and data collected from the Ethiopia Horticulture Development Association (EHDA).

* Buyers and unpackers at the Dutch auction scored firms from 1 to 5 (5 the highest) based on their average price obtained at the auction. There is no data for G-Rose, since it does not sell in the Dutch auction.

Table 5 Export Strategies and Average Technological Capabilities Scores of Kenyan-Owned Floriculture Firms

TC Categories/ Functions	Export Strategy	Investment	Product	Production	End Market	Linkages
GC subcontracting firms	Subcontracting	Low	Low	Low	Low	Low
GCP firms	Large volumes, mainly mainstream roses to Dutch auction	Medium-High	Medium	Medium-High	Medium	Low- Medium
	Small volumes, summer flowers through direct sales	Low-Medium	Medium	Medium	High	Low
FDB firms	Large volumes, tailor-made bouquets to Dutch auction	High	Medium	High	Medium- High	Medium
	Small volumes, unique rose varieties through direct sales	Medium-High	High	High	High	High
BNV firms	Large volumes, tailor-made bouquets and unique breeds of roses through direct sales	High	High	High	High	Medium-High

Source: Authors, based on firm survey scoring exercise.