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Global Value Chain

A global value chain (GVC) refers to the interconnected network of activities involved in the production and delivery of goods and services that are performed by multiple firms, operating in different countries. In a GVC, different stages of production, such as design, research and development, manufacturing, marketing, and distribution, are performed by different firms in different countries, with each firm adding value to the final product or service.

For example, consider the production of a smartphone. In a global value chain, the design and development of the smartphone might take place in one country, the manufacturing of the components in another country, the assembly of the components into a final product in a third country, and the marketing and distribution of the smartphone in yet another country. Each of these stages involves different firms that specialize in different aspects of the production process, and together they form a value chain that spans multiple countries.

The rise of global value chains has been facilitated by advances in transportation, communication, and information technologies, which have made it easier for firms to collaborate and coordinate their activities across borders. By participating in a global value chain, firms can access new markets, tap into specialized knowledge and capabilities, and reduce costs by taking advantage of lower labor costs and other benefits in different countries.

Overall, global value chains play a significant role in the global economy by connecting firms and economies, allowing for the efficient and effective production and distribution of goods and services, and fostering economic growth and development.

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