How and when does relational governance impact lead-time performance of developing-country suppliers in global value chains?

Abstract

Purpose This study aims to integrate social capital theory and the knowledge-based view of firms to develop and test a theoretical framework of the mechanisms that explain the influence of relational governance (RG) on lead-time performance (LTP) of developing-country suppliers in global value chains (GVCs). The authors distinguish between the relational and structural dimensions of RG to explain how they interact to create knowledge and leaning opportunities that transform into performance outcomes. Design/methodology/approach Hypotheses were tested using data collected from a sample of 321 Bangladeshi suppliers embedded in apparel GVCs by using structural equation modeling. Findings RG creates knowledge and learning opportunities that transform into LTP. Relationship quality (RQ) is found to contribute positively to knowledge learned (KL) contingent on relationship structure. KL is found to fully mediate the influence of buyer-supplier RQ on LTP of suppliers. Research limitations/implications The dyadic nature of buyer-supplier interactions calls for multisource approaches in measuring buyer-supplier RQ. The authors also recommend future research to test the model in other industries for greater generalizability. Practical implications Developing-country suppliers in low-technology labor-intensive GVCs can improve their LTP by strengthening their capabilities for internalizing external knowledge and developing and maintaining high quality relationships with wide networks of buyers. Originality/value The conceptualization of RG that explicitly distinguishes between the relational and structural dimensions is novel and should inspire future theoretical and empirical research on GVC governance and performance.

Learning by supplying to climb the value chain: suppliers’ transition from B-to-B to B-to-C

“…First, it contributes to the literature on supply chain management and international business, in particular on the learning and value generation mechanism of STEEs’ from the buyer–supplier relationship (Ranta et al , 2020). Consistent with existing studies (Wagner, 2003; Soosay et al , 2008; Benito et al , 2019; Islam et al , 2021a), our findings highlight how STEEs’ multiplex and repeated engagements can enhance their scope of knowledge, learning opportunities and development of capabilities. Specifically, we found that trust-based relationships with a broader set of buyers and market players can enhance STEEs’ resource reach, knowledge accumulation and learning to overcome their inherited limitations (Wan and Wu, 2017; Islam et al , 2021b).…”

“…The disintegration of the value chain and the relocation of high-quality, innovative and R&D-oriented manufacturing and processes by international firms remained a vital strategy for cost reductions and innovative solutions (Lewin et al , 2009; Stephan et al , 2008; Kotabe et al , 2003). International sourcing ties is a continuous learning process (Stephan et al , 2008), it can contribute to the suppliers’ stock of knowledge and resources, allowing them to move up the value chain (Li et al , 2010; Patrucco et al , 2022; Islam et al (2021a). In this study, we have examined how STEEs in their sourcing ties acquired knowledge and developed capabilities that facilitated them to internalize external knowledge essential for climbing the value chain (from B-to-B to B-to-C).…”

“…2.1 Global value chain, governance and learning Supply chain management literature has highlighted the role of international strategic alliances (Ho and Wang, 2015), sourcing partnerships (Hoque et al, 2016;Sinkovics et al, 2018) and offshore outsourcing ties for learning and knowledge transfer (Islam et al, 2021a;Wagner, 2003). These studies have underscored the importance of interactive learning mechanisms compared to the non-interactive forms (Glückler, 2013), where firms tend to develop relationships with external knowledge creators (Khurshid et al, 2019) to acquire knowledge and develop capabilities (Sinkovics et al, 2019).…”

“…Firms are under tremendous pressure to offer innovative products and services at competitive prices. To survive in such a highly competitive business environment, firms – primarily located in developed countries – have disintegrated their value chain by establishing outsourcing ties with suppliers from developing countries (Contractor et al , 2010; Gereffi et al , 2005; Islam et al , 2021a). These relationships help buyers reduce production costs and allow suppliers to generate revenues (Ellram et al , 2008).…”

Supply chain accountability, COVID-19, and violations of workers’ rights in the global clothing supply chain

“…Therefore, it would therefore be no surprise if, under the pandemic condition, retailers were to take steps that entail severe consequences for workers. Suppliers usually operate on paper-thin margins in a value-trapped supply chain (Islam et al , 2021). Retailers squeeze suppliers, leading them to pressurise workers, taking advantage of weak socioeconomic conditions (Lewthwaite‐Page, 1998).…”