Global value Chain Governance

The drivers of economic globalization are leading many firms to disaggregate and redistribute their operations by outsourcing and offshoring. The result of the process is to create global value chains (GVCs) that are a collection of loosely affiliated, spatially distributed firms engaged in bringing products from raw materials to end use. A key insight from previous research is that GVCs are typically orchestrated by multinational enterprises (MNEs) given their control over key markets or critical technologies. Yet, very little is known about the emerging phenomenon in which MNEs appear to control production along the GVC without ownership of those assets. This is an important issue as consumers, regulators, and civil society are holding flagship MNEs increasingly responsible for behavior and performance along their entire GVC. This chapter analyzes GVC governance to highlight the fact that MNEs often require specific types of capabilities that relate to the context of their industry and the GVC in which they are embedded. The dynamic capabilities approach is extended to explore the ways and means of GVC governance by lead MNEs to shed new light on the contextual differences that influence the resources and capabilities required to improve GVC performance.