Gene

Marketing

Global value chain

Control (management)

Ecology

Biology

Competitor analysis

Competitive advantage

Economics

Biochemistry

Computer science

Outsourcing

Linkage (software)

Comparative advantage

Business

International trade

Competition (biology)

Emerging markets

Management

Value chain

Value (mathematics)

Leverage (statistics)

Supply chain

Operations management

Industrial organization

Chemistry

Finance

Knowledge management

Machine learning

Complementary assets

Journal of Economic Geography

The rising share of intangibles in economies worldwide highlights the crucial role of knowledge-intensive and creative industries in current and future wealth generation. The recognition of this trend has led to intense competition in these industries. At the micro-level, firms from both advanced and emerging economies are globally dispersing their value chains to control costs and leverage capabilities. The geography of innovation is the outcome of a dynamic process whereby firms from emerging economies strive to catch-up with advanced economy competitors, creating strong pressures for continued innovation. However, two distinct strategies can be discerned with regard to the control of the value chain. A vertical integration strategy emphasizes taking advantage of ‘linkage economies’ whereby controlling multiple value chain activities enhances the efficiency and effectiveness of each one of them. In contrast, a specialization strategy focuses on identifying and controlling the creative heart of the value chain, while outsourcing all other activities. The global mobile handset industry is used as the template to illustrate the theory.

Location, control and innovation in knowledge-intensive industries