Challenges of Value Chain Development

It is often easier for lower-tier economies, such as China, to move up the value chain than for established economies like Silicon Valley to move down. Companies accustomed to high-margin operations find it challenging to adapt to low-margin sectors due to their financial expectations and workforce investments. For instance, many tech companies initially dismissed Amazon Web Services due to assumed low margins, but later recognized its significant profitability. This highlights a structural limitation where companies are reluctant to invest resources in areas perceived as less lucrative, leading to a preference for scaling upwards.