The nature of innovation in global value chains

Global value chains (GVCs) have revolutionized production processes and many companies no longer produce goods and services entirely in one single country or within their own organizational boundaries. Through off- shoring and outsourcing, value chains are sliced up and activities are dispersed to locations and actors where they can be produced or executed most efficiently. The fine slicing of GVCs also implies that innovation activities can be geographically dispersed and separated from other GVC activities. However, there have been inconsistent arguments on the impact of this dispersion on innovations and on the effect of innovations on GVC activities, as research on the topic has been sporadic, inconclusive, and fragmented. Thus, this paper conceptually discusses the nature of innovation in GVCs by reviewing literature and raises important questions that should be addressed. It also outlines a variety of possible research directions and future research foci that can and should be taken to develop the field.