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Foreign direct investment

Climbing up global value chains: Leveraging FDI for economic development


Published 07 June 2022

The fragmentation of production offers new opportunities to economies seeking to take part in global value chains (GVCs). With the help of foreign direct investment (FDI), some economies are shifting their GVC participation to an increasing number of higher value-added tasks.

Bangalore - dubbed as the 'Silicon Valley' of India and one of the world's fastest growing regions - owes its success in part to policies that are sensitive to international developments and global value chains, and make the most of dynamic specialization and foreign direct investment. The two key factors – GVCs and FDI – created an ecosystem that enabled the region's economic ‘upgrading’.

Following Bangalore’s precedence, the reconfiguration of FDI networks and GVCs offers much promise to other cities and regions across Asia. This report by Riccardo Crescenzi of London School of Economics and Oliver Harman of the Univeristy of Oxford sets out to build a wider evidence base for tackling the opportunities and challenges related to this reconfiguration.

By offering a critical review of existing scholarly and policy literature on global value chains in Asia,the authors present in a systematic and critical manner the evolution of GVCs and their link to FDI and economic development. The report also examines the role of different types of firms and regions, the heterogeneous subnational geography of GVC functions, and the links between GVC indicators and regional indicators based on FDI. Lastly, in light of the conceptual and empirical gaps, the report sketches a policy framework designed to guide debates and public policies in Asia.

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Riccardo Crescenzi is a Professor of Economic Geography at the London School of Economics and is the current holder of a European Research Council (ERC) Grant. He is also an Associate at the Centre for International Development, Harvard Kennedy School of Government, Harvard University.

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Oliver Harman is a Cities Economist for the International Growth Centre’s (IGC) Cities that Work initiative based at Blavatnik School of Government, University of Oxford and Associate Staff at London School of Economics.

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