Does Export Marketing Engagement by Manufacturers Pay Off? Evidence from the Vietnamese Wood Furniture Industry

Abstract

Presently, price-competitive manufactures from the emerging economies of Asia are flooding the world market. The welfare gains to the consumers in the mature Western economies are undisputed and the persistently high growth rates of emerging economies, such as those of China, Taiwan and Vietnam, are, to a large extent, driven by the successful export of manufacturers.¹ However, from the perspective of individual firms in these emerging economies the export blessings are questionable. Generally, the competition among the exporting firms is extremely tough (Kessing and Lall, 1992; Hobday, 1995; Piore and Ruiz Durán, 1998) and it is now standard procedure for global buyers to appropriate the productivity gains of local manufacturers by incorporating annual price reductions in their sourcing contracts (Gereffi, 1999; Ernst, 2001). A way to escape such a price and profit squeeze might be to ‘move up the value chain’ into more lucrative upstream and downstream activities (Schmitz, 2006). In contrast to manufacturing, research and development (R&D) and marketing, sales are assumed to be less competitive activities with better opportunities for monopolistic earnings because entry barriers to these upstream and downstream activities are high in general (Wise and Baumgartner, 1999; Powell and Snellman, 2004). Hence, by embarking on a catch-up process (Schmitz and Knorringa, 2000; Kaplinsky et al., 2003; Mudambi, 2008) or a functional upgrading process (Gereffi, 1999; Kaplinsky and Morris, 2001; Humphrey and Schmitz, 2004) in the direction of the two higher ends of the global value chain, emerging economy firms may improve their possibilities for appropriating the value they create in the global chain and thereby generate economic rent.