While larger firms and multinationals are the driving force behind global value chains (GVCs), there are several ways smaller firms participate and benefit from GVCs. For example, SMEs can specialise in specific segments of production, rather than having to master all processes required to produce finished goods. They can also benefit from greater flexibility than larger firms, and often have the capacity to customise and differentiate products, allowing them to respond rapidly to changing market conditions and increasingly shorter product life cycles.
SMEs can engage in GVCs in several ways. This includes directly by exporting an intermediate good or service to an individual or firm overseas, or indirectly by supplying multinational or other domestic firms with products that are then exported. SMEs can also benefit from GVCs through greater access to competitively priced imports, or by receiving knowhow or technology spillovers from the larger (or “lead”) firms they supply.