Stuck at the bottom: Role of tacit and explicit knowledge on innovation of developing-country suppliers in global value chains

Abstract

Abstract We take a social exchange theoretical perspective of innovation to develop and test a model of the intervening role of tacit and explicit knowledge exchange in explaining innovation of developing-country suppliers in non-equity-based global value chains (NEGVCs). Results of structural equation modelling for a sample of Bangladeshi suppliers embedded in apparel NEGVCs show that tacit and explicit knowledge fully mediate the associations between network competence and both low value-added and high value-added innovation contingent on the quality of network relationships. We also found that both tacit and explicit knowledge contribute more to low value-added innovation than to high value-added innovation. The managerial and policy implications of our findings as to why developing-country suppliers in NEGVCs are stuck in low value-added activities are fully discussed.