Impact of Production Linkages on Industrial Upgrading in ASEAN, the People’s Republic of China, and India: Organizational Evidence of a Global Supply Chain

Tomohiro Machikita, Yasushi Ueki
JEL codes: 
ADBI Working Paper Series

This paper presents a simple model of industrial upgrading as a result of backward and forward
information linkages between upstream and downstream relations. It also serves as an
empirical investigation of the impact of mutual knowledge exchange on the knowledge
production function using data on firms’ self-reported customers and suppliers. Evidence from
interconnected firms in Indonesia, Thailand, Philippines, and Viet Nam suggests that there are
strong spillover effects between downstream and upstream firms in terms of international
standard certification. The degree of product and process innovation is quite diverse across
manufacturing firms within a local supply chain and within a global supply chain. Firms are likely
to achieve product innovation if they have customers in foreign countries. Customers in Japan
and the People’s Republic of China play an important product innovation role for firms in
Association of Southeast Asian Nations (ASEAN) economies, and customers in the United
States or Europe play an important industrial upgrading role in connecting ASEAN firms with the
global market.