Local Firms in the Ethiopian Apparel Export Sector: Building Technological Capabilities to Enter Global Value Chains
CAE Working Paper 2018:2Cornelia Staritz / Lindsay Whitfield
Economic development is composed of many multifaceted processes, but growth in the technological capabilities of locally-owned firms is essential. Hence, it is crucial to understand how and why local firms invest in building technological capabilities. As a starting point, we need to know which technological capabilities local firms have and how they can be conceptualized, operationalized, and measured in the context of globalized industries. The objective of this working paper is to do this for the apparel export industry in Ethiopia, which has experienced impressive growth since 2010 and will continue to grow, positioning Ethiopia as an important new apparel supplier country. The paper uses original data generated from a firm-level survey designed to measure technological capabilities in apparel exports, combined with in-depth interviews with a sub-set of local firms and institutional actors. Using this data, the local apparel-exporting firms were assessed on strategically selected indicators across different categories of capabilities and then given an aggregate technological capabilities score. The analysis shows that local exporting firms generally have low technological capabilities and struggle to meet export requirements along all capability categories. However, there is important variation among the local firms, particularly related to firm owners’ pro-active efforts to learn from other firms and experts and between vertically integrated, FOB, and CMT firms. This working paper is a revised version of CAE Working Paper 2017:4. It draws on fieldwork carried out after the initial local firm survey and thus presents a more accurate assessment of local firms’ capabilities.