Last year, for the first time in history, developing economies attracted more foreign direct investment (FDI) �� 52 percent �� than developed economies, according to the latest FDI report from the United Nations Conference on Trade and Development (UNCTAD) and the World Trade [Hong Kong Company Formation & Registration]Organization (WTO). The impact of this report on GVCs, say Wharton and industry experts, could be profound.

There is an enormous amount of change going on. The global supply chain is in flux, notes Wharton operations and information management professor Morris A. Cohen. International supply networks have been in place for decades now, but the pace of global trade expansion has skyrocketed past the rate of the world��s GDP growth.

The recession of 2008-2009 has further increased trade with developing economies, adds Anthony Mistri, economics expert at the World Trade Organization.

Nations may have borders, but businesses no longer do.

Changing GVCs

In 1990, developing countries had a 20 percent share in global trade. Today, that figure is more than 40 percent. Moreover, transnational companies coordinate around 80 percent of global trade, according to UNCTAD.

This impact is particularly significant in developing economies, where value-added trade contributes to nearly one-third of a country��s GDP compared to almost one-fifth in developed nations.

The more foreign investments there are in a country, the higher the level of participation in GVCs,[company registration in Hong Kong, Hong Kong company incorporation]thereby resulting in higher domestic value added from trade.

Moreover, developing economies with effective GVC participation can increase GDP per capita growth by 2 percent above average, says Axele Giroud, an expert at UNCTAD who helped author the report. But that kind of change doesn��t happen overnight.

GVCs adapt dynamically, but depending on the sector, supply chains are shifting in different ways. You see the disintegration or fragmentation of value chains in manufacturing, says Wharton management professor Ann Harrison. But in agriculture, you see the opposite going on.

Agribusiness is becoming more and more integrated.

Current technological advancements have made production processes become more fragmented, Mistri adds. Better communications have facilitated operating at a distance, not only for raw materials or components planning, but also in services and management. Participation in GVCs can commence with the smallest of components �� and don��t involve building[Company Registration in USA] a complete new factory �� creating more opportunities to participate.

China has jumped to third place from sixth place as the world��s biggest investor, behind the United States and Japan, Giroud says.