Validating scales for economic upgrading in global value chains and assessing the impact of upgrading on supplier firms' performance

Economic upgrading in global value chains is critical for developing economies, as upgrading enhances supplier firms' performance, employment and economic growth. However, to date there is no valid measure of firm-level upgrading, making it hard to systematically measure and address deficiencies within firms to enhance firms' performance and national economic development. This paper addresses this gap by developing and validating measures of four types of economic upgrading using data from senior executives (n = 350) in Bangladeshi apparel supplier firms. The resulting measures have reliability, convergent and discriminant validity as well as nomological validity. The findings of the assessment of nomological validity suggest that suppliers' manufacturing capability is critical to all four types of upgrading. The four types of upgrading, however, have differing impacts on supplier firms' production and export performance. Suggestions as to how these measures can be used in practice, policy and research to better understand and manage firm-level upgrading are provided.