Rethinking Global Supply Chains: measurement, impact and policy

Project Information

RETHINK-GSC

Grant agreement ID: 101061123

DOI

10.3030/101061123

Project closed

EC signature date 2 June 2022

Start date 1 October 2022

End date 30 September 2025

Funded under

• Culture, creativity and inclusive society

Total cost

€ 2 999 878,00

EU contribution

€ 2 999 877,75

Coordinated by

INSTITUT FUER WELTWIRTSCHAFT LEIBNIZ ZENTRUM ZUR ERFORSCHUNG GLOBALER OKONOMISCHER HERAUSFORDERUNGEN
Germany

Periodic Reporting for period 2 - RETHINK-GSC (Rethinking Global Supply Chains: measurement, impact and policy)

Reporting period: 2024-01-01 to 2025-09-30

Summary of the context and overall objectives of the project

​The Rethink-GSC project investigates how value chains, particularly in services and knowledge creation, are coping with structural change and geopolitical headwinds. Economies are becoming more services-oriented, while climate change, geopolitical conflicts, protectionist trade policies, and lingering pandemic effects pressure Europe’s economy. RETHINK-GSC research shows that companies are reorganising supply chains in response, while innovation strengthens their resilience and enables new ones.

However, structural weaknesses in Europe persist. European universities file far fewer patents than U.S. or Chinese counterparts, and corporate innovation is dominated by a small number of multinationals. These deficiencies could undermine long-term competitiveness. The EU should therefore promote knowledge generation in both firms and universities. Research shows that subsidies boost knowledge production, while tax cuts also support innovation.

Moreover, findings indicate that the link between knowledge creation and regional employment growth is strongest when innovation is broad-based and cross-disciplinary, cautioning against policies that concentrate innovation in few locations or fields.

Several studies show that flows of knowledge and goods are closely intertwined. Policymakers should therefore not treat innovation policy separately from trade or tax policy, but account for their interdependencies.

Work performed from the beginning of the project to the end of the period covered by the report and main results achieved so far

One important aspect of work in RETHINK-GSC is the generation of new data on knowledge flows in global supply chains. In WP1, patent data created a Knowledge-Input-Output table (KIO), alongside analysis of open-source software scripts for knowledge flows in software development. The project also developed measures for trade in intermediate goods adjusted for price changes, and knowledge generation in European universities. These datasets have underpinned further analyses in subsequent work packages.
In WP2, researchers gathered survey data on knowledge transfers across firms and disruptions in global supply chains. In a first round survey, companies in Austria, Denmark, Germany, and Hungary were included, while the second round expanded the scope to also include firms in Ireland and Poland. A questionnaire was crafted based on pilot interviews and discussions with experts, administered via Qualtrics, with GDPR-compliant survey invitations sent out. The data set and stylized facts are described in a working paper, and the data was further analyzed in subsequent WPs.
Work on WP3-7 has progressed as planned using datasets from WP1 and WP2 alongside administrative register data from various European countries. Papers focus on relationships between GSCs in services and goods and firms' adjustments to increased risk post-negative shocks like Brexit or the Covid-19 pandemic. Further empirical work investigates identified relationships and the implications of GSCs on labor markets, innovation performance, and environmental outcomes such as green innovation.

Progress beyond the state of the art and expected potential impact (including the socio-economic impact and the wider societal implications of the project so far)

In recent decades, extensive research has focused on global supply chains (GSCs) in goods and their advantages. RETHINK-GSC surpasses current standards in several ways. Firstly, it offers fresh and consistent data to assess GSCs in services, particularly in knowledge exchanges, through innovative knowledge-input-output tables (KIO) derived from patent data. These tables reveal the intricate links in innovation across different locations and patent categories. Analysis of KIO data linked to firm-level data demonstrates the significant link between innovation and knowledge flows, and employment growth in both firms and regions.
Secondly, similar input-output tables are generated based on open-source software development, illustrating collaboration trends across different locations. While collaboration tends to gravitate towards certain areas, the decision on sourcing code for further program development shows no such concentration.
Another key innovation is the gathering of new firm level data from company surveys in Austria, Denmark, Germany, Hungary, Ireland and Poland. These surveys yield detailed insights into firms' sourcing decisions, perceived disruptions, adjustments, and supplier relationships, particularly regarding knowledge transfer and innovation cooperation. Given the focus and scope of the survey, we have a unique dataset that is particularly useful for understanding the risks firms face in GSCs and their adaptive strategies.
Analysis of the KIO data (in a comparison with GSC measures in goods based on goods input-output tables), as well as the new survey data show that knowledge and goods flows are deeply interconnected. RETHINK-GSC research also shows that firms adapt supply chains differently in response to shocks These are novel and important findings with strong implications for policy.

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