Competition and power in global value chains

Abstract

This paper bridges the understanding of power in the global value chain literature and the analysis of market power and barriers to entry in competition economics. It draws on competition economics to provide a better understanding of the ways in which bargaining power between firms shapes patterns of value creation and capture along value chains. It also considers the influence which competition laws have on the conduct of large and powerful firms. Through the case studies of supermarkets and petrochemicals in South Africa, the paper shows how the dominant bargaining power of lead firms owes much to the historical impact of government regulations and industrial policy, including those enforced by competition authorities. We conclude by highlighting that choices regarding the type of competition rules to be adopted have important implications for the ability of supplier firms to build capabilities and to upgrade in value chains.