Moving Up the Value Chain:How to Make the Smiling Curve smile? Case studies of ICT firms from an emerging economy

Abstract: The concept of Smiling Curve coined by Stan Shih, founder of Acer, shows the appropriable value added of different sections of an industry. Normally the upper and down streams of the value chain that generate higher value added are controlled by firms from developed economies, while firms from developing world are typically stuck at the manufacturing section with low value added. However, the unprecedented growth of Information Communication Technology hardware market over the years has opened up possibilities for those latecomers to catch up. Although a handful firms have succeeded, little is known about how they managed to move up along the value chain. Trying to solve this mystery, a conceptual model is proposed based on case studies of ICT firms from an emerging economy, Taiwan. Knowing the difficulties for firms to survive head-to-head competitions that come along with the moving up activities, the model suggests that firms should look for new market opportunities by the means of functional upgrading and innovation, and eventually evolve into creating a new value chain with high end topped by themselves.