Title: Micro-level aspects of knowledge-based development: measuring quality-based upgrading in MNCs' Hungarian subsidiaries

Authors: Andrea Szalavetz

Addresses: Research Centre for Economics and Regional Studies, Hungarian Academy of Sciences, 45, Budaörsi út, Budapest, H-1112, Hungary

Abstract: With the fragmentation and the geographical dispersal of production, not goods but activities are the basic units of international trade analyses. Therefore, data about local subsidiaries' business functions (BFs) produce a more reliable picture on local subsidiaries' upgrading patterns than trade statistics with a 'product approach'. This paper presents the first results of a Hungarian research project on local subsidiaries' functional upgrading. Our results call for the refinement of the analytical framework and of data gathering methods. Three kinds of challenge have to be resolved: 1) BFs are decomposable, consisting of dozens of sub-functions, which results in sizeable inter-subsidiary differences in the contribution of 'identical' functions to MNC-level value added; 2) the impact of functional upgrading on subsidiaries' performance indicators is ambiguous; 3) BF decomposability impacts subsidiary classifications. Subsidiaries can be classified innovative contributors in specific sub-functions, while at the same time they are implementers with basic capabilities in other sub-functions of the same BF.

Keywords: business functions; functional upgrading; global value chains; GVCs; automobile industry; multinational corporations; MNCs; Hungary; automotive value chains; local subsidiaries; MNC subsidiaries; performance indicators; knowledge-based development.

DOI: 10.1504/IJKBD.2012.050089

International Journal of Knowledge-Based Development, 2012 Vol.3 No.4, pp.313 - 330

Available online: 28 Oct 2012 *

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