The Influence of Power in Inter-Firm Relations on Flexibility and Security
Relations between customers and first-tier suppliers are often characterised by unequal levels of power (Coe et al., 2008). In turn, power unbalances can influence working conditions in both customers and suppliers and more specifically the combination of flexibility and security in the workplace (Wilthagen and Tros, 2004). More powerful customers can for example impose on their suppliers working practices that increase flexibility while keeping flexibility low and security high for their own workforce to reduce uncertainty (Crouch, 2012).
In our paper we carry out a comparative case study of 6 subsidiaries of Multinational Companies (MNCs) and 11 first-tier suppliers in Western Europe (Italy, Belgium, UK, with one case in the Netherlands). Using data collected with semi-structured interviews and analysed with the support of Qualitative Comparative Analysis, we analyse how inter-firm relations affect flexibility and security in customers and suppliers and show that 'flexibility externalisation' is common between customers and less powerful suppliers.
Customer MNCs tend to impose flexible working conditions on their suppliers, and these are more likely to resist customers' requests when they are leaders of their market or not largely dependent on specific customers. Effects on security are more ambiguous, since suppliers can still increase security internally while implementing flexibility-enhancing measures. Institutional factors do not seem to play a strong role in influencing power relations, but they influence the instruments and resources social actors use to manage flexibility and security at the workplace.
This paper contributes to the existing debate on the relations between customers and first-tier suppliers in several ways. Firstly, it suggests that insights from Supply Chain Management (SCM) literature (Cox, 1999) on the nature of customer-supplier relations can be integrated with GVC (Gereffi et al., 2005) and GPN (Coe et al., 2008) research. Secondly, it confirms the importance of power asymmetries, linked to differences in value creation, in the way companies along value chains influence each other's activity and working conditions (Bair, 2005). Finally, it suggests that institutional factors should be accompanied by economic analysis of competitiveness, market leadership and general economic conditions to fully understand inter-firm relations in global value chains.
References
Bair, J. (2005). Global Capitalism and Commodity Chains: Looking Back, Going Forward. Competition & Change, 9(2), 153–180.
Coe, N. M., Dicken, P. and Hess, M. (2008). Global production networks: realizing the potential. Journal of Economic Geography, 8(3), 271–295.
Cox, A. (1999). Power, value and supply chain management. Supply Chain Management: An International Journal, 4(4), 167–175.
Crouch, C. (2012). Beyond the Flexibility/Security Trade-Off: Reconciling Confident Consumers with Insecure Workers. British Journal of Industrial Relations, 50(1), 1-22.
Gereffi, G., Humphrey, J. and Sturgeon, T. (2005). The governance of global value chains. Review of International Political Economy, 12(1), 78–104.
Wilthagen, T. and Tros, F. (2004). The concept of “flexicurity”: a new approach to regulating employment and labour markets. Transfer: European Review of Labour and Research, 10(2), 166–186.