In the “flying geese paradigm,” Japanese economist Kaname Akamatsu explains that companies restructure to find the cheapest labor costs by moving low-value activities to nearby less-developed countries. Today that story rings truer than ever as global value chains (GVCs) reach a critical turning point. Simply put, GVCs take a broader look at supply chains coordinated by multinational companies, but also encompass economic analyses of the countries involved with the activities.

Last year, for the first time in history, developing economies attracted more foreign direct investment (FDI)—52 percent—than developed economies, according to the latest FDI report from the United Nations Conference on Trade and Development (UNCTAD) and the World Trade Organization (WTO). The impact of this report on GVCs, say Wharton and industry experts, could be profound.

“There is an enormous amount of change going on,” says Wharton operations and information management professor Morris A. Cohen. “The global supply chain is in flux.” International supply networks have been in place for decades now, but the pace of global trade expansion has skyrocketed past the rate of the world’s GDP growth.

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