Hochschule Karlsruhe Hochschule Karlsruhe - University of Applied Sciences
Hochschule Karlsruhe Hochschule Karlsruhe - University of Applied Sciences

Value creation is worthwhile

Advantages and need for local value chains


The objective of the study is to analyze the advantages and disadvantages or opportunities and risks of, on the one hand, global or local value chains and, on the other hand, highly fragmented or integrated (high intra-company value creation) value creation structures at selected Baden-Württemberg companies, especially in the electromobility sector. Among other things, the findings, which are based on statistical analyses and expert interviews, should enable companies and other interested target groups to evaluate the benefits of different structures and assess them in the context of their specific situation.

Central results and main findings

The study results clearly show that establishing and expanding own value creation among manufacturing companies is worthwhile from an economic perspective, and in more ways than one.

In-house value creation provides profit and productivity potential

For one thing, the level of a company's own value creation has a significantly positive influence on its profit situation. This is evidenced by a linear regression model based on cost structure data from the German Federal Statistical Office, according to which the depth of value added has a strong positive influence on the level of profit (in %) in the gross production value of companies, when controlling for size classes and economic sectors.
On the other hand, the depth of value added has a strong positive influence on the productivity of a company. It is the strongest explanatory factor for both total factor productivity (TFP) and labor productivity of a company, as shown by specific linear regression models based on the broad empirical company survey Modernization of Production of Fraunhofer ISI.

Global sourcing does not show positive profitability effects

In contrast, foreign sourcing of inputs does not provide a significant explanatory contribution to a company's profit situation or productivity. Contrary to widely held views, the use of and integration into global supply chains does not seem to be positively related to a company's economic development. One explanation for this could be that the potential price and cost reduction effects of cooperation with foreign suppliers are offset by greater coordination efforts and higher coordination expenses to ensure flexible response and delivery capability in the supply chain, as suggested by the qualitative results of the 16 expert interviews conducted.
Another noteworthy finding of the study is that labor productivity is negatively related to the share of semi-skilled or unskilled workers employed in manufacturing firms

Baden-Württemberg's companies rely on a high degree of in-house value creation

In light of these study results, Baden-Württemberg's manufacturing companies are well positioned. They rely on an above-average depth of value added compared to companies from other German states. Analysis of data from the Baden-Württemberg Statistical Office shows that the average depth of value added in Baden-Württemberg's manufacturing sector was significantly higher than the average for the German manufacturing sector as a whole in 2013, at almost 39 percent. As the analyses show, Baden-Württemberg companies position themselves with above-average frequency as "local makers," i.e., as companies that have a lower-than-average import ratio of intermediate inputs coupled with an above-average depth of value added for their company size class.

Focus: Value creation potential in electromobility

Approximately a quarter of the value added in fossil-fuel-powered passenger cars today is accounted for by the powertrain, i.e., the combustion engine and the transmission (Schade et al. 2012). This is precisely where German and Baden-Württemberg manufacturers have a technological lead. However, the value-added share of these conventional components will decrease significantly in future passenger cars with alternative drive technologies. In contrast, significant growth in value-added potential can be expected in the future for electromobility-related components, especially for batteries, power electronics and electric motors. Among the components of alternative drive concepts, the battery represents the component with the highest value added in both the medium and long term. In addition, fuel cell vehicles (FCEVs) are expected to see increasing market and value-added growth from the middle of the next decade.

Project duration

  • September 2014 to May 2015

Funding by

  • Ministry of Finance and Economy of Baden-Württemberg
  • .


  • Prof. Dr. Steffen Kinkel


Prof. Dr. Steffen Kinkel

Phone: +49 (0)721 925-2915
Fax: +49 (0)721 925-2965
steffen.kinkelspam prevention@h-ka.de

Geb. E, Raum 105
Moltkestraße 30
76133 Karlsruhe