Local Firms in Madagascar’s Apparel Export Sector: Technological Capabilities and Participation in Global Value Chains
CAE Working Paper 2018:3Cornelia Staritz / Lindsay Whitfield
Structural transformation involves moving the economy away from a set of assets based on primary products exploited by unskilled labor toward knowledge-based assets exploited by skilled labor. The term technological capabilities refers to these knowledge-based assets - the technical, organizational and managerial skills necessary to achieve international levels of efficiency and quality. The objective of this working paper is to measure and assess the technological capabilities of local firms in the apparel export industry in Madagascar, as a first step before analyzing and explaining how firms have achieved these capabilities. In doing so, it uses original data generated from a firm-level survey specifically designed to measure technological capabilities based on strategically selected indicators across different categories of capabilities in apparel exports. Despite difficult country-specific conditions, particularly related to political instability, local apparel exporting firms have built significant levels of technological capabilities - but segmented along ethnic and product lines. The specific types of international linkages played an important role in capability building, particularly the specific niche and higher value product specialization that comes with a particular set of buyers and related global value chain dynamics as well as the more embedded types of foreign investment due to diaspora linkages with local firms and regional production strategies.