Supplier strategy in global value chains: shaping governance and profiting from upgrading

Abstract

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.

What lies between market and hierarchy? Insights from internalization theory and global value chain theory

“…In contrast, GVC theory starts from the fact of externalization and gives most attention to the determinants of the different ways in which externalized activities can be coordinated. This produces a more fine-grained understanding of the types of knowledge flows and controls needed for different types of externalized transactions than that provided by internalization theory (Humphrey, 2014), but it also means that GVC theory has little to say about why firms might keep activities in-house and the costs of managing such activities (as has been noted by Sako & Zylberberg, 2017).…”

Introduction to the Handbook on Global Value Chains

“…A first set of contributions has explored the discursive dimension that frames buyer-supplier relations and the related transmission mechanisms along value chains (Gibbon et al, 2008). A second set has sought to tame some of the inevitability of 'buyer power' in the earlier literature by showing how key suppliers in some industries have been able to establish increasingly powerful positions Tewari, 2006;Kawakami, 2011;Raj-Reichert, 2015), by highlighting paths and strategies that suppliers can follow not only to create value, but also to retain it (Kaplinsky, 2004(Kaplinsky, , 2005Ponte and Ewert, 2009;Sako and Zylberberg, 2017) and/ or by highlighting the increasing power of lead firms based in the Global South, often facilitated by state support (Horner, 2017;Horner and Nadvi, 2018).…”

Closing the gap between Business Networks and Value Chain Analysis

“…Our paper contributes foremost to bringing the literature on GVCs closer to the research on business networks associated with management and strategy. Such links remain relatively unexplored within the GVC literature and can reveal fruitful research avenues, as discussed recently by Sako and Zylberberg (2017). By better connecting with network research, GVC theory may improve its capacity to cope with modern empirical challenges in which networklevel phenomena are salient, such as in studies of digital economy relationships (Jacobides et al, 2018;Möller & Halinen, 2017).…”

“…Over time, GVC theory has gradually transitioned from macro-level debates, mostly shaped by developmentalist concerns, to a research agenda that also incorporates micro-level issues such as firm strategy (Gereffi, 2014a). In spite of this, concepts and constructs which could be useful to such an agenda and have already been studied in the business network literature remain underexplored in GVC research (Sako & Zylberberg, 2017).…”