This document summarizes a presentation given by Petri Rouvinen at the Pujiang Innovation Forum in Shanghai, China. The presentation discusses global value chains and the symbiotic relationship between Finland and China. It notes that many multinational corporations shape global value chains and that the location of assembly, whether in China or Finland, makes little difference for the Finnish value added to products like Nokia phones. Over time, more value is captured in Asia as products are assembled there. The location of intellectual property rights, profits, and services are important factors in determining where value is captured. Both China and Finland benefit from focusing on high-value activities that earn high returns, like branding, services, and managing intangible assets. Global value

1. Global Value Chains and
Sino-Finnish Symbiosis *
Petri Rouvinen
ETLA, The Research Institute of
the Finnish Economy
Pujiang Innovation Forum
Finland was Pujiang
Innovation Forum’s (Shanghai)
Country of Honor. The event
was hosted by Wan
Gang, Minister of Science &
Technology, China, and Jan
Vapaavuori, Minister of
Economic Affairs, Finland.
Shanghai, 26 Oct. 2013
* A part of BRIE-ETLA collaborative research (www.brie-etla.org).

2. %
of global value chains
are shaped by
transnational
corporations
Source: UNCTAD 2013, p. iii
http://unctad.org/en/PublicationsLibrary/diae2013d1_en.pdf

3. The assembly location –
China versus Finland –
makes little difference for
Finnish Value Added !?
39%
41%
Beijing, China
Salo, Finland
Source: Ali-Yrkkö, Rouvinen, Seppälä & Ylä-Anttila 2011 http://v.gd/oLoC2n

4. Over time, value added shifts to Asia
Asia
Asia
26%
Finland
Source:
Seppälä &
Ali-Yrkkö 2013
Asia
30%
Finland
26%
Finland
21%
3310
Nokia 3310
in 2000
1100
Nokia 1100
in 2004
Asia
37%
8%
1200
Nokia 1200
in 2007

5. Are engineering products, such as this burner
by Finnish Oilon, different from electronics?
Oilon
20+ years in China
Best-known burner
brand at China’s
industrial sites
CleanDesign Award
with Beijing District
Heating Company

6. Assembly locations more important
in cases of 10 Engineering Products
Why?
Localization of parts/supplies
& supporting services
Role/location of IPRs
Location of the profit center
24%
54%
Abroad (China)
In Finland
Transfer pricing practices
Source: Ali-Yrkkö & Rouvinen 2013 http://pub.etla.fi/ETLA-Raportit-Reports-16.pdf

7. Lessons of 39 global value chain case studies:
Who creates/captures value?
• Desirable positions for an enterprise
– Brand owner, orchestrator
– Interfacing with customers
– Gatekeeper in the chain
• Desirable positions for an individual
– High-level ”supporting” service tasks
– Creation/management of intangible assets

8. Value creation and capture
often detached from the
physical flows …
… also in manufactures
value is often in services
and other intangible aspects

9. Both for China and Finland, the
national interest in activities that
i.e., earn ever higher returns per work hour
Why? Because these activities can sustain
raising wages & repatriated profits
How to promote these? (1) engage in the
right businesses; (2) invest in tangible and
intangible capital; (3) organizational efficiency

10. Software scales like no other business!
Finnish Rovio:
the best selling app
Over 1.7 billion
downloads
Significant
presence in China

11. The raising prominence of
global value chains has lifted
hundreds of millions of people
out of poverty worldwide.
Nowhere more so than in China.
Operations in China have
enabled Finnish companies to
maintain global competiveness
and sustain jobs in Finland.

12. Thank
You!
fi.linkedin.com/in/petrirouvinen/
Petri.Rouvinen@ETLA.fi
 +358–50–3673474