Value Chain Approach to Poverty Reduction: Equitable Growth in Today's Global Economy

This paper provides an overview of the Value Chain Approach. It states that the Value Chain Approach is as an effective tool for identifying and analyzing the relationships between firms to effectively design donor-sponsored economic growth interventions that reduce poverty by increasing the competitiveness of an industry and the firms within that industry.

It highlights four key factors of this approach that affect competitiveness:

• Inter-firm cooperation and coordination is crucial to competitiveness in the global market;
• Relationships among firms in a value chain can influence the distribution of learning and benefits within that chain;
• Distribution of benefits creates incentives or disincentives for performance;
• Learning and innovation are essential for creating and sustaining competitiveness.

Finally, the paper presents a diagnostic framework for assessing constraints to- and opportunities for- enhancing an industry's competitiveness. It includes five elements:

• End market opportunities;
• Enabling environment (international and national);
• Inter-firm cooperation - vertical linkages;
• Inter-firm cooperation - horizontal linkages;
• Supporting markets (sector-specific and non-sector specific services, including financial services);
• Firm-level upgrading (product and process upgrading).