Between costs and distances: production network integration and regional environment of the Hungarian light industry

Abstract

Based on the global production network (GPN) theory this study examines the network integration of the Hungarian textile, clothing, leather and footwear (TCLF) producers, and their regional environment. The qualitative research reveals the variegated network positions of the local firms unifying core and periphery features in a network-specific way. A complex pattern of relocations showing the large share of intra-regional shifts and combining with upgrading can be observed. Strategic coupling between TCLF networks and regional assets reflects the growing importance of higher value added and higher entry barrier activities, and flexible production. These results refer to the primary role of cost-capability ratio and market access in shaping TCLF network dynamics. Strategic coupling processes are determined by the intermediary position of the region between the high costs of the core economies and the long distances of the cost-efficient global production platforms. However, shortcomings in semi-peripheral regional environment including the erosion of TCLF-related knowledge represent growing obstacles for the long-term and fruitful network integration, and can create challenges for industry-specific development policies. The dynamic model delineated in the study contributes to the better understanding of the processes taking place in the labour-intensive TCLF sector and in semi-peripheries close to the core regions.