Introduction
Bangladesh is the world’s second-largest exporter of ready-made garments (RMG) (Nath, Mustayin, & Eweje, 2025), a position built on cost-efficient production and assembly. However, assembly captures less value than design, branding, and sourcing, limiting value capture and technological development. Similar to countries including Vietnam and Malaysia, which progressed from producing labour-intensive products to higher-value electronics and technology-intensive manufacturing (see Table 1), Bangladesh could follow a similar trajectory. However, Bangladesh’s capacity to move up the GVC value chain will determine if it can successfully diversify from garments. This raises key questions: How can Bangladesh leverage its industrial base to upgrade in GVCs? What are the implications for managers and IB researchers?
Drawing on the GVC literature, we assess Bangladesh’s upgrading prospects in the electronics and pharmaceutical sectors using the trifecta framework: functional specialization (tasks), knowledge connectedness (linkages), and the governance role of lead firms (Pietrobelli, Rabellotti, & Van Assche, 2021). Electronics is technology-intensive, whereas pharmaceuticals represent a regulated manufacturing sector. We situate Bangladesh’s development challenge alongside regional comparators, then map the three dimensions onto both sectors to demonstrate the need for distinct managerial strategies. We analyze the opportunities and challenges for MNCs, following Chand (2024), and connect this approach to GVC upgrading, diaspora networks, infrastructure and governance, and NGO partnerships to offer insights for managers and scholars.
Bangladesh: The Challenge
For two decades, Bangladesh’s annual GDP has grown by more than 6%, on average. Its population of more than 173 million, low labor costs, and manufacturing base indicate potential for GVC upgrading. Bangladesh performs worse than Vietnam and Malaysia on many development indicators (see Table 1). Most FDI inflows are reinvested earnings, rather than new foreign capital, and the FDI stock is below 5% of GDP (ADB & OECD, 2025).
This gap may reflect policy incoherence and institutional fragmentation. The investment climate is worsened by overlapping investment agencies and a trading framework that promotes current RMG exports (ADB & OECD, 2025). High levels of perceived corruption also lower outside investors’ assessment of institutional quality. Still, Bangladesh has unique assets, such as a strong NGO network and a diaspora of 10 million, which could facilitate GVC integration (Chand, 2024).
Bangladesh’s state-led economic plans suggest a sophisticated industrial future. Vision 2041 aims to turn Bangladesh into a high-income country by 2041, building on Digital Bangladesh. Key priorities include increasing exports, investing in digital infrastructure and human capital, and moving to higher-value sectors such as medicines and electronics (UNDP, 2021). Clothing and textiles continue to dominate exports, but officials recognize the need to diversify, e.g., into electronics and medicines, and to develop the RMG value chain.
Foreign electronics multinationals, including Walton, Samsung and Xiaomi, manufacture locally, transferring production know-how. Samsung’s Naringin plant (~50 km northeast of Dhaka), run by Fair Electronics, produces smartphones and contributes to local production capacity (UNDP, 2021). Pharmaceutical companies such as Beximco, Square and Renata export generic drugs to over 150 countries, using WTO TRIPS flexibilities and enhancing quality control and regulatory capabilities (BIDA, 2025). Key companies are listed in Table 2.
While manufacturing captures less firm-level value than pre- and post-production activities, aggregating value creation remains important. Upgrading through GVCs is promising in electronics and pharmaceuticals (Bradley et al., 2024), offering opportunities to integrate production with higher-value activities such as regulatory capability, process engineering, and quality management.
What the Trifecta Tells Us about Electronics versus Pharmaceuticals
The trifecta framework argues that task localization, deep linkages for learning, and local enterprises’ absorptive capacity to co-create are critical for value capture (Pietrobelli et al., 2021). For Bangladesh’s RMG sector, Korean FDI was a catalyst when Desh Garments partnered with Daewoo in 1979 to provide factory-based training. Of 130 Bangladeshi trainees, 115 later left Desh to start companies or join other garment firms (UNCTAD, 1992). The RMG sector localized low-value cut-make-trim (CMT) jobs, built initial learning linkages through Daewoo, and enhanced the capabilities of local enterprises.
However, the sector remained stuck at the CMT assembly stage when governance returned to buyer-led transactions with little functional knowledge transfer from the foreign brands, offering Bangladeshi firms scant room for adding value. Foreign firms accepted complementarity-enhancing process improvements, but resisted functional upgrades that threatened their core competencies. Can electronics and pharmaceuticals disrupt this pattern?
Electronics
Bangladesh’s tech industry has shifted from importing to more local production. Fair Electronics manufactures Samsung phones in the greater Dhaka region. Xiaomi has established local manufacturing facilities. Huda et al. (2024) note that Walton has created a branded operation, alongside the growth of national champions and MNC-led assembly. Assemblers have been attracted by tax incentives, infrastructure investment, and tariff differentials (BIDA, 2025)
Still, upgrades are limited, as Bangladeshi operations mainly involve assembly, with limited production or component design. Narrow relationships produce shallow linkages involving prescribed functions. Fair Electronics is a contract manufacturer for Samsung, executing a fixed specification rather than co-development. Foreign-based engineering teams overseas handle design, component sourcing, and R&D. No channel has emerged to seed entrepreneurship as had previously with RMGs. Most local firms also have limited absorptive capacity; an exception is Walton, which signals the kind of firm-level upgrading that otherwise remains elusive. Bangladesh’s industrial nodes run the risk of continuing to be isolated enclaves with little economic impact if other businesses don’t emulate Walton by bolstering local ties and embeddedness.
In electronics, managers prefer phased localization: localize assembly; then testing, quality assurance, and supplier development; while exploring workforce upskilling over a three- to five-year period. The advantages of early co-investment are difficult for later entrants to reproduce.
Pharmaceuticals
The WTO TRIPS waiver has enabled Bangladesh’s pharmaceutical industry to meet 98% of the domestic demand while exporting generic medicines to more than 150 countries. Beximco, Square, and Renata have WHO-approved facilities and are gaining exposure in regulated markets, supported by the establishment of government-sponsored pharmaceutical parks and companies’ investment in R&D and quality processes (World Bank, 2025). Pharmaceuticals represent a three-pronged case of compliance-intensive work, links to standards-based regulators and financiers, and domestically-driven businesses with developed absorptive capacity. External linkages, rather than the vertical lead-firm relationships of the electronics sector, help build capabilities.
The quality systems of Beximco, Square, and Renata were designed to global standards, to satisfy WHO GMP, US FDA, UK MHRA, and TGA (Table 2). Square’s facility in Kenya and Renata’s $58 million IFC financing and subsidiaries in the UK and Ireland demonstrate that such standards-based links build capability, not dependency. Weak IP protection allows companies to reverse-engineer generics. Inward FDI plays no major role in Bangladesh’s pharmaceutical industry; FDI in pharmaceuticals is only 1.4% of Bangladesh’s total inward FDI (ADB & OECD, 2025). This relative isolation from international markets and strategic partners creates two barriers to upgrading: only 4% of Bangladeshi pharmaceutical companies meet European Union Good Manufacturing Practice (EU GMP) requirements, while some local industry associations resist foreign entry (Asian Development Bank [ADB] & Organisation for Economic Co-operation and Development [OECD], 2025).
Changes are afoot. The Patent Act (2023) increased protection to 20 years, but Bangladesh has no trade-secret law that limits technology transfer (ADB & OECD, 2025). As Bangladesh graduates from LDC status, it will have to take full advantage of intellectual property flexibilities, including compulsory licensing. Beximco, Square and Renata could benefit from the regulated-market quality expertise, co-manufacturing and complex-generics development expertise of MNCs.
Both trajectories are underpinned by contrasting governance. The lead firm still dominates electronics, with Samsung and Xiaomi setting specifications and Bangladeshi assemblers doing the work. The domestically driven pharmaceutical sector is regulated; Beximco, Square, and Renata have exclusive control over production, regulatory strategy, and export decisions, and work with foreign partners on negotiated, not dictated, terms. Therefore, progress calls for patience and capacity building in one sector and speed and teamwork in the other. This is summarized in Table 3.
Challenges Ahead
As shown in Table 4, Bangladesh’s transition to integrated manufacturing is constrained by interrelated factors that condition the trifecta framework. They are not equally challenging to both sectors; they amplify enclave risk in electronics and raise the urgency of pharmaceutical partnerships before the TRIPS window closes for LDCs.
Implications for IB Managers and Researchers
The trifecta diagnosis gives Bangladeshi managers two sets of recommendations. The electronics industry has limited capacity, few tasks, and weak connections among local companies. This translates into a practical sequence of beginning with assembly-only operations, bringing testing and quality assurance onshore within a year or two, and then certifying and developing local suppliers over a three- to five-year period, supported by sustained investment in technical training to bridge the talent gap identified in Table 4. This is not the same as localizing everything at once. These infrastructure gaps require managers to set local hiring and sourcing targets and to budget up front for backup power so that operations are economically embedded in Bangladesh rather than simply physically located there.
The pharmaceutical industry faces reversed reasoning; foreign collaborations can benefit both parties and build domestic companies’ absorptive capacity. The TRIPS window can be used to establish co-manufacturing or structured licensing arrangements to lock in good partners before facing full competition. NGO partnerships can support commercial access and social legitimacy, and the diaspora can be an entry accelerator for both sectors.
The RMG sector’s 2013 Rana Plaza[1] tragedy offers important lessons for all industries, demonstrating that a GVC’s reputational and legal risks are attached to the lead firm, rather than the industry. The tragedy showed how supply chain failures can have global reputational impacts, and that social and environmental reforms risk not leading to real improvements without policies that account for GVCs. The growth of electronics assembly and pharmaceuticals manufacturing in Bangladesh poses similar risks for MNCs. Electrical and workplace safety are infrastructure issues that arise in electronics. In pharmaceuticals, one error can put key WHO or FDA approvals at risk.
The reputational and legal challenges that reconfigured RMG governance post-2013 now confront electronics and pharmaceutical MNCs as global due diligence requirements, including the EU’s Corporate Sustainability Due Diligence Directive, take center stage. Bangladesh offers a case for researchers to study how LDC graduation affects tasks, linkages, and firms across sectors with divergent governance structures: lead-firm-controlled electronics and domestically controlled pharmaceuticals. The juxtaposition of pharmaceuticals and electronics helps to evaluate when MNC linkages facilitate upgrading and when they create enclaves.
Acknowledgments
We sincerely thank Professor Elizabeth Rose for her thoughtful editorial guidance and the two anonymous reviewers for their constructive comments, which helped strengthen the manuscript. We also acknowledge the AIB-CIBER Doctoral Academy for providing a valuable scholarly platform that brought our team together and contributed to the development of this work.
About the Authors
Katerina Boncheva is a lecturer in International Business at Aalto University, Finland. Her research lies at the intersection of international marketing, strategy, and international business, currently focusing on the strategic contradictions that shape firms’ internationalisation decisions, with particular emphasis on how firms navigate evolving global market disruptions. She has published in AIB Insights, Critical Perspectives on International Business and International Marketing Review.
Mimisha Gadhia is a PhD student at the University of Leeds, in the United Kingdom. She is also an alumna of the inaugural cohort of the AIB-CIBER Doctoral Academy. Her research interests focus on the internationalization of firms from emerging markets and on conducting qualitative research in emerging markets. She has recently published in AIB Insights.
Marleth Morales Marenco is a PhD Candidate in Management at the Culverhouse College of Business, Department of Management, at The University of Alabama, USA, and an alumna of the inaugural cohort of the AIB-CIBER Doctoral Academy. Her research examines international entrepreneurship, AI-enabled internationalization, and strategic challenges in emerging markets, with a particular interest in Latin America. She has published in AIB Insights.
Farhana Rahman is a doctoral researcher at Putra Business School, Malaysia, holding a master’s degree in public administration from the University of Malaya. Her research explores economic development, sustainable business practices, human resource management, and their connections with wider society. Her more recent publication is in the Journal of Economic Studies.
Khaled Shukran is a Lecturer at Sunway Business School, Sunway University, Malaysia, and an AIB-CIBER Doctoral Academy alumnus. His research examines subsidiary-headquarters relationships in emerging markets, developing theoretical perspectives and practical insights. He has published in the Journal of Economic Studies, International Journal of Consumer Studies, and AIB Insights.
Alexander Tonn is a final-year PhD student in political economy at the University of St. Gallen, Switzerland, and an alumnus of the inaugural cohort of the AIB-CIBER Doctoral Academy. His research interests lie at the intersection of political economy and international business. Most recently, his work has been published in Critical Perspectives on International Business and *AIB Insights. *