Timothy J. Sturgeon

The governance of global value chains

Abstract This article builds a theoretical framework to help explain governance patterns in global value chains. It draws on three streams of literature – transaction costs economics, production networks, and technological capability and firm-level learning – to identify three variables that play a large role in determining how global value chains are governed and change. These are: (1) the complexity of transactions, (2) the ability to codify transactions, and (3) the capabilities in the supply-base. The theory generates five types of global value chain governance – hierarchy, captive, relational, modular, and market – which range from high to low levels of explicit coordination and power asymmetry. The article highlights the dynamic and overlapping nature of global value chain governance through four brief industry case studies: bicycles, apparel, horticulture and electronics.

Explaining governance in global value chains: A modular theory-building effort

ABSTRACT In this article, we review the evolution and current status of global value chain (GVC) governance theory and take some initial steps toward a broader theory of governance through an exercise in ‘modular theory-building’. We focus on two GVC governance theories to which we previously contributed: a theory of linking and a theory of conventions. The modular framework we propose is built on three scalar dimensions: (1) a micro level – determinants and dynamics of exchange at individual value chain nodes; (2) a meso level – how and to what extent these linkage characteristics ‘travel’ upstream and downstream in the value chain; and (3) a macro level – looking at ‘overall’ GVC governance. Given space limitations, we focus only on the issue of ‘polarity’ in governance at the macro level, distinguishing between unipolar, bipolar and multipolar governance forms. While we leave a more ambitious analysis of how overall GVC governance is mutually constituted by micro/meso factors and broader institutional, regulatory and societal processes to future work, we provide an initial framework to which this work could be linked. Our ultimate purpose is to spur future efforts that seek to use and refine additional theories, to connect theories together better or in different modular configurations, and to incorporate elements at the macro level that reflect the changing constellation of key actors in GVC governance – the increasing influence of, for example, NGOs, taste and standard makers, and social movements in GVC governance.

Globalisation of the automotive industry: main features and trends

This paper lays out the main features of the global automotive industry and identifies several important trends. A boom in developing country sales and production has not yet overshadowed the importance of existing markets in developed regions. Regional integration is very strong at an operational level, yet the industry has recently developed a set of global-scale value chain linkages, and retains national and local elements as well. The paper highlights how global, regional, national and local value chains are nested to create a pattern of global integration that is distinctive to the industry. We use global value chain analysis to help explain the limits of build-to-order in the industry, the role of regional and global suppliers, the shifting geography of production and how the characteristics of value chain linkages in the industry favour tight integration and regional production. We describe how industry concentration focuses power in the hands of a few large lead firms and discuss the implications of this for value chain governance and the geography of production.

Effects of the Crisis on the Automotive Industry in Developing Countries: A Global Value Chain Perspective

This paper applies global value chain analysis to study recent trends in the global automotive industry. The authors pay special attention to the effects of the recent economic crisis on the industry in developing countries. The principal finding is that the crisis has accelerated pre-crisis trends toward greater importance of the industry in the South. More rapid growth of car ownership is the impetus, but the co-location and close interaction of suppliers and lead firms in this industry is an important catalyst. Opportunities to move up in the value chain for suppliers in emerging economies have proliferated and are likely to become even stronger now that an increasing number of new models are developed specifically for markets in developing countries. The co-location of assembly and parts plants in national and regional production systems has largely confined the impact of sales declines during the crisis to each country/region. In addition, the different development strategies followed by countries like Mexico, China, and India are slowly converging as their industries gain size and independence.

Global value chains in the automotive industry: an enhanced role for developing countries?

In this paper, we apply global value chain (GVC) analysis to recent trends in the global automotive industry. We focus on how the recent economic crisis has accelerated pre-crisis trends towards greater importance of the industry in the developing world. The regional structure of production in the industry has largely confined the impact of the crisis within each major producing country/region. Opportunities to move up in the value chain for suppliers in emerging economies have proliferated and are likely to become even stronger now that an increasing number of new models are developed specifically for local markets. While it appears that some large developing countries, especially China and India, are gradually gaining more independence and autonomy as their industries and markets gain size and importance, supplier countries such as Mexico and countries in East Europe remain as dependent appendages of adjacent regional production systems.

Global value chains in the electronics industry: characteristics, crisis, and upgrading opportunities for firms from developing countries

In this paper, we apply global value chain (GVC) analysis to study recent trends in the global electronic hardware industry and their implications for upgrading opportunities for firms from developing countries. We identify three key firm level actors – lead firms, contract manufacturers, and platform leaders. Company, cluster, and country case studies are presented to illustrate how supplier capabilities in various places have developed in the context of electronics GVCs. The findings identify some of the persistent limits to upgrading experienced by even the most successful firms in the developing world. Four models used by developing country firms to overcome these limitations are presented: emerging multinationals, contract manufacturer spinoffs, platform brands and emerging factory-less start-ups. Each of these new models has been enabled, to a greater or lesser degree, by the rise of new markets and new kinds of consumers in developing countries.

Crisis and Protection in the Automotive Industry: A Global Value Chain Perspective

In this paper the authors apply global value chain (GVC) analysis to recent trends in the global automotive industry, with special attention paid to government interventions triggered by the recent economic crisis. The authors first highlight some of the defining characteristics of GVCs in this important industry, especially the unusually strong regional structure of production and sales. National political institutions create pressure for local content, which drives production close to end markets, where it tends to be organized nationally or regionally. They then examine policy reactions to the recent economic crisis, and provide some discussion of the government interventions in the industry. The authors end with a number of policy conclusions that highlight the likely impact of the interventions on the evolution GVCs and the growth of the industry in developing countries.

The global information and communications technology industry: where Vietnam fits in global value chains

The information and communications technology sector has undergone a dynamic process of globalization and fragmentation in the past few decades, leading to the creation of global value chains. Global value chains are populated by a constellation of specialized actors collectively responsible for bringing goods and services to market. Most prominently, these key actors include lead firms (brands), contract manufacturers, platform leaders, and increasingly, information and communications technology services and information and communications technology-enabled services providers. Like other emerging markets, Vietnam is coming to play an important role in this global industry. The recent influx of foreign investors, driven by the countrys low wages and easy access to regional supply chains, as well as the emergence of various local information and communications technology services and information and communications technology–enabled services firms opens opportunities, yet raises important questions for policy makers about how best to leverage global engagement for local capacity building. This paper situates Vietnam in the global information and communications technology industry, and identifies several constraints to future growth, including the limited availability and quality of trained information and communications technology professionals, ineffective supplier development initiatives, and weak entrepreneurial ecosystem, especially in management skills. The paper concludes with a set of policy recommendations and forward-looking statements aimed at helping Vietnam move into higher-value activities in the coming years. The analysis is based on relevant statistics published by the United Nations, Organisation for Economic Co-operation and Development, World Trade Organization, Government of Vietnam, and Vietnamese industry associations, as well as interviews and site visits conducted by the authors during January 19-30, 2015.