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An important gap in the literature on global value chains (GVCs) and bottom-of-the-pyramid markets concerns how GVCs develop to serve frontier markets and what role multinational and local firms play in that process. This paper takes a first step in filling this gap by studying the evolution of Africa’s mobile telecommunications industry. Applying a historical analysis, we find that the emergence of GVCs for African frontier markets followed a three-step process: initially, multinational corporations (MNCs) linked host countries to the MNCs’ existing value chains; subsequently, local MNC spin-offs experimented in altering key downstream value chains to mitigate the frontier markets’ demand- and supply-side challenges, and replicated those value chains in multiple African countries; and finally, other incumbents reoriented their downstream value chains for frontier markets, aided by the development of experienced local labor markets and specialized contractors. A key implication of our findings is the need for sufficient competitive incentives and industry knowledge to stimulate firms to invest in transforming existing GVCs for frontier markets. This process is highly uncertain; however, successful GVC transformation can lead firms to expand in multiple frontier markets, thereby propelling a growth phase across an entire developing region.

The emergence of GVCs for frontier markets: Insights from the African mobile telecommunications industry