STRENGTHENING foreign linkages and participation in the global value chain (GVC) helps improve Philippine manufacturers’ processes and capacity to innovate, a new study by the Philippine Institute for Development Studies (PIDS) found.
The “Impact of Foreign Linkages on Innovation Activity of Manufacturing Firms in Calabarzon” study analyzed previous literature and surveys on the manufacturing industry in the provinces of Region 4A—Cavite, Laguna, Batangas, Rizal and Quezon—to probe deeper into the role foreign linkages play in manufacturing firms’ innovation efforts.
It noted that the insights and findings reviewed underscored the potential of such linkages to boost both product and process innovation capabilities.
“Innovation is an important determinant of small and medium enterprises’ (SMEs) participation in GVCs,” the study said. “This is because it is through product and process innovations that SMEs are able to meet the requirements of higher-tier firms.”
Firms with more foreign linkages are “able to introduce new products, improve procurement processes and explore new markets more,” it added.
These linkages “can indeed positively affect a firm’s likelihood to undertake product innovation that involves the development of a new product using a technology new to the firm,” the study said.
“On the other hand, process innovation has consistently shown to be positively influenced by foreign linkages,” it added.
“The potential of foreign linkages as a means of establishing Philippine firms [in]the global value chain and market, as well as ensuring that domestic firms will continue to compete and innovate, are key points that can be contributed by this study,” PIDS said.
