The growth of emerging market firms with a global presence highlights the need to better understand how supplier strategy influences global value chains (GVCs). We respond to this need by applying corporate strategy and technology strategy to improve the predictive and prescriptive power of GVC theory. Under what circumstances can suppliers in GVCs shape governance and profit from upgrading? Using corporate strategy, we argue that supplier strategy concerning make-or-buy decisions and buyer diversification can effect a change in governance mode. Using technology strategy, we identify appropriability regimes and complementary assets as essential preconditions for suppliers to capture value from upgrading. Our central contribution is in developing an integrative theoretical framework for analyzing how suppliers alter governance over time, and how they capture the value they create by upgrading, resulting in shifts in value chain polarity. This framework has significant implications for economic development.
Purpose -Integrating smallholders into high-value global markets represents a unique opportunity to effect large-scale poverty reduction in the countryside. The purpose of the paper is to add empirical evidence to the discussion of how to best incorporate smallholders into the formal economy sustainably and responsibly. Design/methodology/approach -The paper first builds a theoretical framework around global value chain theory and literature on smallholder inclusion and Kenya's growing horticultural sector. It then moves to explore a Kenyan smallholder-based business model that incorporates 4,000 flower producers through an efficient and transparent intermediary. The analysis focuses on the importance of governance, upgrading and strong intermediaries for including smallholders in horticultural value chains. Findings -In conclusion, this paper finds that although smallholder inclusion is both favorable and feasible based on theory, literature and case study analysis, it remains limited. It proposes embracing innovative smallholder-based business models as a viable path out of poverty in countries with low labor costs, suitable climatic conditions and basic infrastructural capacities. Research limitations/implications -Limitations include a reliance on largely qualitative research methods due to gaps in available data. Practical implications -Policy implications include the necessity of promoting agricultural development through investments in extension services, the creation of research and development centers and improvements in the rule of law. Originality/value -This paper is unique in its focus on business models and global value chains as mechanisms through which to include smallholders into the global economy.
The Policy Research Working Paper Series disseminates the findings of work in progress to encourage the exchange of ideas about development issues. An objective of the series is to get the findings out quickly, even if the presentations are less than fully polished. The papers carry the names of the authors and should be cited accordingly. The findings, interpretations, and conclusions expressed in this paper are entirely those of the authors. They do not necessarily represent the views of the International Bank for Reconstruction and Development/World Bank and its affiliated organizations, or those of the Executive Directors of the World Bank or the governments they represent.
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