The Influence of value chain governance on innovation performance: A study of Italian suppliers

Abstract

This paper explores how value chain governance affects the innovation performance of suppliers of intermediate products. We take advantage of a unique dataset of Italian firms to identify governance regimes based on the perceived levels of technological capabilities of suppliers and explicit coordination in the value chain. Our results indicate that ‘modular’ value chain governance is more conducive to innovation for suppliers, especially when these firms have medium capability levels. Conversely, market-based governance modes relate strongly to lower innovativeness amongst suppliers, particularly those with lower capabilities. These patterns are also reflected in the sales of innovative products. Our results go partially against other findings in the GVC literature, whereby relational value chains are usually seen as providing the most favorable environment for learning and innovation.