Main characteristics of nowadays’ global value chains and their relevance to the Hungarian automotive manufacturing industry

Abstract

Modern-day globalization allows international fragmentation and production sharing. By connecting companies, employees and consumers, global value chains (GVCs) influence the structure of international trade with effects on countries’ GDP, employment and ultimately on the global economy. Enterprises have the opportunity to enter and to upgrade their position within GVCs leading to higher integration in global trade. However, participating in GVCs also has a complex set of prerequisites, including the need to invest in infrastructure, institutions, services, labor force, and in general trade and business environment. We can also name specific characteristics, which enable economies to reinforce their activity within GVCs, like cheap labor force, proximity to end markets or signed trade agreements. For many developing countries this integration process is a major lever of intensive development. This paper analyzes the role of Hungary in global value chains with a focus on the automotive manufacturing industry. It overviews global and local changes occurred in the last decades, when foreign direct investments of automotive manufacturers appeared in the country. The findings of the article could be of great assistance for policy makers to answer questions about the possible development paths and can provide some ideas about actions needed for an effective, beneficial participation in GVCs.