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A HANDBOOK FOR VALUE CHAINRESEARCH
Prepared for the IDRC by
Raphael Kaplinsky and Mike Morris
*We are grateful to colleagues in both our individual institutions and in the Spreadingthe Gains from Globalisation Network (particularly those participating in the BellagioWorkshop in September 2000) for discussions around many of the issues covered inthis Handbook and also to Stephanie Barrientos, Jayne Smith and Justin Barnes.
 
An Important Health WarningorA Guide for Using this Handbook
Lest anyone feel overwhelmed by the depth of detail in this Handbook, especiallywith respect to the sections on methodology, we would like to emphasise at the outset:this Handbook is not meant to be used or read as a comprehensive step by stepprocess that has to be followed in order to undertake a value chain analysis. We knowof no value chain analysis that has comprehensively covered all the aspects dealt within the following pages, and certainly not in the methodologically sequential Handbook set out below. Indeed to try and do so in this form would be methodologicallyoverwhelming, and would certainly bore any reader of such an analysis to tears.Our intention in producing a Handbook on researching value chains is to try andcomprehensively cover as many aspects of value chain analysis as possible so as toallow researchers to dip in and utilise what is relevant and where it is appropriate. It isnot an attempt to restrict researchers within a methodological strait-jacket, but ratherto free them to use whatever tools are deemed suitable from the variety presentedbelow.The text below attempts to cover the broad terrain of researching value chains, andhence spans the contextually relevant, the conceptually abstract, the methodologicallyparticular, and the policy relevant. Part 3 on Methodology can therefore be read in anumber of ways: as a form of expanding the conceptual issues raised in Part 1 onBasic Definitions and Part 2 on Analytic Constructs; or as an array of possibletechnical tools,
some
of which may be usefully adopted and methodologically appliedeither partially or fully depending on circumstances; or whole parts can be skippedand not read at all.Indeed, apart from using it as a research tool, it is not even our intention that everyoneshould read the Handbook in the way one would go through a (good) novel –sequentially, and from cover to cover. We therefore urge readers to use their commonsense and treat it as one does an edited book, or researchers to read it in the same wayone reads a mechanics manual for finding out about one’s car. Treat the contents pageas an à la carte menu, read the bits that are interesting, take what is relevant forwhatever research task is at hand, and skim what is not relevant.
 
Contents
1INTRODUCTION...............................................................................................1PART 1: BASIC DEFINITIONS AND CONTEXT.................................................42WHAT IS A VALUE CHAIN?...........................................................................4
2.1D
EFINITIONS
...................................................................................................4
2.1.1The Simple Value Chain........................................................................42.1.2The extended value chain.......................................................................42.1.3One or many value chains.....................................................................6 2.1.4One or many labels?..............................................................................6 
3WHY IS VALUE CHAIN ANALYSIS IMPORTANT?..................................9
3.1T
HE GROWING IMPORTANCE OF SYSTEMIC COMPETITIVENESS
........................93.2I
S EFFICIENT PRODUCTION ENOUGH
?............................................................12
3.2.1Making the best of globalisation..........................................................143.2.2The march of globalisation..................................................................153.2.3Winners and losers from globalisation................................................16 3.2.4Making the best of globalisation..........................................................183.2.5Making the worst of globalisation.......................................................183.2.6How does value chain research inform this debate on globalisation?22
PART 2: KEY ANALYTICAL CONSTRUCTS....................................................244IS THE VALUE CHAIN A HEURISTIC DEVICE OR AN ANALYTICALTOOL?........................................................................................................................25
4.1T
HREE KEY ELEMENTS OF VALUE CHAIN ANALYSIS
......................................25
4.1.1Barriers to entry and ren....................................................................254.1.2Governance..........................................................................................294.1.3Different types of value chains............................................................32
5VALUE CHAINS, INNOVATION AND UPGRADING...............................37
D
IFFERENT TYPES OF UPGRADING
.............................................................................37
6VALUE CHAIN ANALYSIS AND THE DETERMINANTS OF INCOMEDISTRIBUTION........................................................................................................41
6.1M
APPING DISTRIBUTIONAL OUTCOMES IN THE VALUE CHAIN
........................416.2U
NDERSTANDING THE DETERMINANTS OF INCOME DISTRIBUTION IN VALUECHAINS
......................................................................................................................436.3L
EVERS OF POWER IN VALUE CHAIN DYNAMICS
............................................44
7HOW DOES VALUE CHAIN ANALYSIS DIFFER FROMCONVENTIONAL INDUSTRY STUDIES AND FROM WHAT SOCIALSCIENTISTS (AND ESPECIALLY ECONOMISTS) NORMALLY DO?.........46PART 3: A METHODOLOGY FOR UNDERTAKING VALUE CHAINRESEARCH...............................................................................................................498THE POINT OF ENTRY FOR VALUE CHAIN ANALYSIS......................50

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