Sustainable regional real options value chains: an ounce of prevention is worth a pound of cureCadenas de valor de opciones reales regionales sostenibles: una onza de prevención vale una libra de curaCadeias de valor de opções reais regionais sustentáveis: antes prevenir do que remediar

Abstract

Purpose This study aims to offer a value chain (real options) approach for reducing uncertainty exposure by pursuing a global frictionless trade ethos almost exclusively. Jolts of significant proportion, such as the recent COVID-19 pandemic and corresponding reshoring phenomena observed in Mexico and Central America, enhance the topic’s relevance. Design/methodology/approach This conceptual study sheds light on heightened systemic uncertainty because of extreme events; proposes a mitigation protocol rooted in real options (ROs); and prescribes incentivizing regional value chains through public–private partnerships (PPPs). Findings This study identifies a systemic multinational enterprise (MNE) response aimed at mitigating the repercussions of the most recent jolt of significant worldwide proportions and suggests developing regional value chains through PPPs. In doing so, the authors recognize an incipient MNE trend toward nearshoring and backshoring to achieve this end. This phenomenon is relatively underdeveloped in Europe, where fewer than 4% of firms have engaged in backshoring activities, even in the three-millennia-old Basque region. In contrast, last year’s backshoring of global value chains (GVCs) in Mexico and Central America was noticeable. Research limitations/implications This study is among the first, to the best of the authors’ knowledge, to explore the nearshoring phenomenon as a response mechanism, and it opens avenues for finding better ways to mitigate worldwide uncertainties and exposure to extreme events. Practical implications This model would benefit MNEs and governments by keeping their operations running as close to capacity as possible, even when external jolts cause a partial or total system shutdown of MNEs’ GVCs. The proposed solution, namely, PPPs, can achieve these objectives through real options. Social implications A social benefit of the regionalization of MNEs’ GVCs would be helping to resolve societal grand challenges, including lowering their global carbon footprint and reducing poverty. This is because having a regional supply facility close to their home market would not only lead to cost reductions for MNEs but also allow them to conduct more on-site quality control checks. Originality/value The regional real options concept offers an excellent opportunity for practitioners and governments to improve MNEs’ success via the mitigation of uncertainties and, concomitantly, the lives of billions of people.