World Intellectual Property Report 2017Intangible Capital in Global Value Chains3Foreword 5Acknowledgements 6Disclaimer 7Executive summary 9Chapter 1 Global value chains: the face of 21st-century international commerce 21 1.1 Characterizing the growth of global value chains 221.2 How global value chains are organized and governed 241.3 What return accrues to intangible assets? 261.4 How intangible assets permeate global value chains 301.5 Concluding reflections 36Chapter 2 Coffee: how consumer choices are reshaping the global value chain 432.1 The changing nature of the coffee value chain 432.2 Intangible assets and value added 462.3 Managing intangible assets in the coffee value chain 592.4 Conclusion 64Chapter 3 Photovoltaics: technological catch-up and competition in the global value chain 713.1 The evolution of the PV global value chain 723.2 How do intangibles add value in the PV global value chain? 783.3 What is the role of IP in the PV industry? 843.4 Conclusion 90Chapter 4 Smartphones: what, s inside the box? 954.1 The smartphone global value chain 954.2 Value capture along the smartphone value chain 984.3 The role of intangible assets in value capture 1044.4 Perspectives on technological learning and intangibles 124Acronyms 133Technical notes 134Table of contents8WORLD INTELLECTUAL PROPERTY REPORT 20179A consumer buys a new smartphone. What exactly is she paying for? The phone consists of many parts and components manufactured all over the world, and the price needs to cover the cost of those. She is also paying for the labor of the people who made the components and assembled the final product, and for services such as transportation and the retailing of the product in a physical store or online. And, very importantly, she is paying for intangible capital the technology that runs the smartphone, its design and its brand name. Today, production is global. Companies perform different production stages in different locations around the world. At each stage of the supply chain or global value chain for each product, value is generated by workers, by production machinery and, increasingly, by intangible capital things one cannot touch, but which are crucial to the look, feel, functionality and general appeal of a product. Intangible capital is crucial in determining success in the marketplace which companies succeed and which fail. Is it possible to quantify the importance of intangible capital? What types of intangibles are most valu- able at different production stages and for different consumer products? How do companies manage their intangible assets in global value chains, and what role does intellectual property (IP) play in gener- ating a return on these assets? Although there have been numerous studies on the rise of global value chains, little evidence is available to answer these questions. This report endeavors to help fill that gap. It does so at the macroeconomic level, by presenting original estimates of the income accruing to intangible assets in 19 global manufac- turing value chains, and it also explores the role of intangibles in greater detail through case studies of specific value chains for smartphones, coffee and solar cells.Insight into the role of intangible assets in global value chains matters from a policy perspective. Investments in intangible capital are a key source of economic growth, and better understanding how those assets are generated and exploited in a global- ized marketplace may help policymakers refine the enabling environment for such investments.Similarly, acquiring intangible assets is a key impera- tive for policymakers in developing economies seek- ing to support local firms that strive to upgrade their production capabilities in global value chains. The rise of global value chainsProduction processes have been unbundled and spread around the worldThe growth of global value chains is a key distinguishing feature of the so-called second wave of globalization that set in some time in the second half of the 20th century. The invention of the steam engine in the 18th century unleashed the first globalization wave, which peaked early in the 20th century. International commerce during the first wave mostly consisted of trade in commodities and fully assembled manufactured goods. What stands out about international commerce in the second globalization wave is the unbundling of the production process and the spreading of different production stages across different locations around the world. As a result, trade patterns have shifted toward multidirectional trade in intermediate goods within particular industries.Several forces supported this shift in the organization of global production: Falling costs of international trade made it cost- effective to disperse production across a number of locations. Cheaper and faster transportation had already propelled internationa