From Governance to Corporate Strategy: Injecting Management Studies into Global Value Chain Research

Although various branches of management studies, including strategy, innovation, and international business, have much to contribute to research on global value chains (GVC), they have made little headway thus far.  In fact according to a bibliometric analysis carried out for this study, GVC studies are rarely published in management journals. This paper identifies reasons why, and proposes a way forward, with a view to clarifying the purpose of GVC analysis. Specifically, it offers means by which management studies can be used to inform and extend the core GVC concepts of governance, upgrading and distance.

The starting point for the paper is the notion of GVC governance.  Whether it is two types (producer-driven vs buyer-driven) (Gereffi and Korzeniewicz 1994) or five types (Gereffi et al. 2005), this notion is problematic for embedding management studies in GVC research. GVC governance is applied to an industry, whereas the study of corporate strategy explores how firm-level agency leads to variation in governance.  ‘Lead firms’ may set a governance norm, but strategy is about firms’ capacity to deviate from this norm.  Buyer firms’ strategic decisions are over firm boundaries (make-or-buy), the nature of supplier relations (arms-length or committed), and the number of suppliers chosen (multiple vs sole sourcing).  These dimensions tend to be decided simultaneously. 

GVC analysis often fails to consider the possibility that upgrading may not necessarily lead to greater value added and profit. The ‘profiting from innovation’ model in technology strategy (Teece 1986) is perhaps the most useful framework to analyze the mechanisms via which firms may sometimes create but fail to capture profit. Here, we seek to challenge the assumption that upgrading (or downgrading) always leads to a supplier’s competitive advantage. Regimes of appropriability, the dominant design paradigm and access to complementary assets all have important implications for whether or not a firm will benefit from upgrading.

Finally, it is assumed that GVC governance is uniform within an industry anywhere in the world.  Perhaps influenced by economic geography, all types of distances (geographic and others) appear to be collapsed into a single dimension.  GVC scholars should embrace a more nuanced definition of distance that takes regulatory, cognitive and normative dimensions of countries’ institutional profiles into account when examining cross-border linkages (Peng et al. 2008; Scott 2001). International business scholars, especially those with renewed interest in institutional diversity in emerging markets, are keen to analyze the impact of national institutions on firm-level strategy in GVCs.

References

Gereffi, G., J. Humphrey, T. Sturgeon. 2005. The governance of global value chains. Review of International Political Economy 12(1) 78-104.

Gereffi, G., M. Korzeniewicz. 1994. Commodity Chains and Global Capitalism. Praeger, New York.

Peng, M.W., D.Y.L. Wang, Y. Jiang. 2008. An institution-based view of international business strategy: a focus on emerging economies. Journal of International Business Studies 39 920–936.

Scott, R.W. 2001. Institutions and organizations. Sage Publications, Thousand Oaks.

Teece, D.J. 1986. Profiting from technological innovation: Implications for integration, collaboration, licensing and public policy. Research Policy 15 285-305.