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Paper short abstract

This study explores how Pakistani automotive suppliers integrate into global value chains, highlighting pathways for industrial upgrading. It finds that most enter GVCs through intermediaries, often as captive vendors, but some leverage international certifications for faster growth and innovation.

Paper long abstract

This study examines how automotive suppliers in Pakistan grow through participation in global value chains (GVCs), and it explores several pathways of industrial upgrading for these firms. Employing an econometric approach followed by qualitative interviews, the research focuses on the automotive sector in the Lahore region of Pakistan. Data were collected through a survey of 319 automotive-supplier firms, followed by semi-structured interviews with 42 firms, revealing that most local firms experienced business growth because of their enrollment in GVCs. However, these firms typically entered GVCs via contracting arrangements with intermediary firms, original equipment manufacturers (OEMs), which in many cases positioned them as captive vendors and thus constrained the opportunities for industrial upgrading. However, a subset of firms, categorized in this study as “emerging suppliers,” leveraged their prior experience with OEMs to obtain international certifications that enabled access to global markets. It demonstrated that proactive strategies could enable at least some local firms to escape the constraints of OEM-mediated-GVCs. By directly enrolling in GVCs, emerging suppliers not only achieved faster growth but also pursued innovation strategies that led to industrial upgrading. These findings suggest that a geographical imbalance in firms’ innovatory capacities is being orchestrated through OEM-mediated enrollment in GVCs. Some firms, however, are able to adapt and evolve amid the ongoing reconfiguration of GVCs due to technological change and public policy. The study offers a granular perspective on firm performance and industrial upgrading, with implications for how GVCs impact local economic development in the industrial regions of emerging economies.