Upgrading in the Global Value Chains: The Case of the Czech Republic

Since the completion of its economic transformation, the Czech Republic has become an export-oriented economy and belongs among those countries with the highest participation in GVCs in the world. The aim of this paper is firstly to assess upgrading of the Czech Republic in the GVCs since the transition. Furthermore, to identify upgrading possibilities and major obstacles to upgrading and summarize policy implications. In terms of education, R&D and innovation, labor productivity and competitiveness the Czech Republic has made progress. Nonetheless, increasing the share of foreign value added embodied in exports and profit repatriations limit the value that is captured in the Czech Republic. Upgrading possibilities were mainly identified in research areas and sectors where the Czech Republic already has comparative advantage and, innovative domestic SME's. Unstable regulatory frameworks and mismatch between the needs of employers and orientation of students have been identified as a major obstacle for upgrading. There is a need to strengthen linkages between business and the public sector, although, strategies of TNC's remain an important variable for upgrading.