Research on global value chains, discussing the concept of upgrading on the example of middle-income, dependent market economies suggests that upgrading is predominantly process upgrading. It is the outcome of local manufacturing subsidiaries’ implementing new production technologies, absorbing and mastering production processes, which enables them to increase productivity and operational excellence. Subsidiaries that can demonstrate their production capabilities are gradually delegated higher-level assignments by parent companies, for instance design, testing, and specific R&D tasks, whereby they also undergo functional upgrading and increase the local value added of their activities. Gradual upgrading ensures a good position to these subsidiaries in the ongoing inter-subsidiary competition for new, futureoriented products. If they are chosen by the headquarters as the manufacturing site, where the new products are produced, this decision entails product upgrading for the subsidiary.
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