Roles of Global Value Chains (GVCs) in Promoting Small and Medium-Sized Enterprises (SMEs) in Laos

This study attempts to address two principal research questions to tighten the development nexus of Global Value Chains (GVCs) and Small and Medium-sized enterprises (SMEs). First, how and when do GVCs promote local SMEs? Second, how can SMEs gain more from GVCs and move up to higher valueadded activities? The findings show that firms’ experiences in GVCs are very significant in explaining adjustments and improvements among SMEs. These positive changes are triggered by innovations and learning-by-exporting that enables them to acquire competitiveness and international standards. Innovations are imperative for local firms to gain competitiveness in the global market and to move up the ladder for higher value-adding activities. The results indicate that crucial factors for the local firms’ innovation capacity improvement are local institutional support, training, increased incentive among workers (wages), firm size, technology transfer, and firm absorptive capacity.