Upgrading, Interactive Learning, and Innovation Systems in Value Chain Interventions

Value chain interventions are increasingly used by donors in the context of private sector development. The paper develops a typology of such interventions, and presents the case of one multilateral lending institution – the Inter-American Development Bank. It argues that interventions risk transforming into an empty label and that an understanding of core global value chain (GVC) concepts, such as power, governance, and rents, is necessary. Further, interventions need to consider different learning channels internal and external to GVCs and particularly the interaction of GVCs with local innovation systems, and the interactive and systemic nature of knowledge and learning. These dimensions have often been overlooked in actual policies and programs. The paper concludes that an improvement in the definition of main concepts and approaches derived from the critical tradition of the GVC literature and of learning and innovation concepts is urgently called for. This reinforces the need for a new generation of industrial policies.