Governance structures are important for upgrading
The GVC framework allows us to identify the lead firms within the agribusiness, manufacturing, and retail segments, their influence upon the rest of the chain, and the avenues for change or upgrading within the chain. The fact that domestic manufacturers and fast-food firms in developing countries have been able to position themselves within global food chains and establish their own “brands” demonstrates that developing countries can upgrade to higher value-added segments in the chain.
The instant noodle phenomenon is a revealing case. Instant noodle technology was first developed by Japan. However, Taiwan has been the leader in adopting advanced technology in instant noodles and bringing it to Asia, particularly China, the world's biggest market for instant noodles. Tingyi, a Taiwan-based firm with its Master Kong brand, has a 43 percent share of the market in China, beating the Japanese joint venture Nissin Hualong, which has 14 percent of China’s instant noodle sales (Dobson 2008). Taiwan has used the technology pioneered by developed countries to be the leader in providing instant foods for the Chinese market. They are also conforming to the business practices of concentration and brand marketing. In addition to Tingyi, Taiwan is home to Uni-President Enterprises, the country’s largest food conglomerate, which encompasses several stages of the food and agriculture value chain. The company procures commodities such as soybeans and corn, and processes them into animal feed. They also manufacture products such as instant noodles, frozen foods, baked goods, and soft drinks (Google Finance 2008).
Understanding GVC governance structures allows researchers to identify the leverage points within value chains. Once we know who the lead firms are in global value chains, we expect these lead firms to define the standards for conduct and performance in an industry. Many food TNCs have already been compelled by government regulations or induced by consumer preferences to change certain practices along the food value chain, such as procuring healthy products and imposing stricter standards upon their suppliers. However, we need to ask whether new business practices are only “skin deep.” While firms may be promoting more nutritional foods in their marketing campaigns, they also may be lobbying against government health regulations or moving to countries with looser regulatory environments.