Flexibility constraints of global value chains : the (re-)emergence of local value chains?

This paper presents an empirical investigation of the advantages and disadvantages of global vs. local value chains. A regression analysis of German firm-level data shows no significant impact of global sourcing on total factor productivity. The cost reduction potentials of global sourcing seem to be offset by higher spending on coordination and control in order to ensure flexible reaction and delivery in the supply chain. Lower price segments and large batches tend to be purchased from suppliers in the Far East, but they are usually not flexible enough to provide varying or customer-specific components.