Product Complexity and GVCs – ADB – ADBI Innovation and Structural Transformation Database

Product ComplexityA characteristic of exported (or imported) products that captures the sophistication of the production capabilities needed to produce and sell the product successfully in international markets. More complex products generally offer larger opportunities to capture value added. We calculate product complexity using the so-called ECI method.
captures the diversity and sophistication of the productive knowledge needed to produce a particular product and sell it with comparative advantage in international markets. The complexity of the set of products exported successfully by an economy provides an indicator of the capabilities that are present in firms located in the economy.
Product complexity is combined with information on GVC participation to capture the complexity of the value chain and the inputs used by the chain (
backward LinkagesAn overview of how many locations (a combination of sector and economy) contribute to a global value chain, and how these contributions are distributed over the chain. Example: the German transport sector value chain uses inputs from the Chinese steel industry and the Dutch electronic chips industry.
), as well as inputs delivered to different value chains (
forward LinkagesAn overview of which global value chains a sector/economy combination contributes to, and how these contributions are distributed over the sector/ economy’s total value added or employment. Example: the Australian mining sector contributes (through many indirect linkages) to output of the German transport sector and the Vietnamese construction industry value chains.
).
Product complexity is also used to identify
upgradingThe process in which (firms within) an economy seize opportunities to capture more value from the products or services that they produce, e.g., by becoming competitive in new products with higher complexity.
opportunities for individual economies.