Abstract
AbstractThe existing literature on global value chains (GVCs) suggests that functional upgrading is a key determinant of whether suppliers are able to capture higher profits in GVCs. However, it is unclear whether the same argument holds for disadvantaged suppliers who face high barriers to achieving functional upgrading. Through a review of existing empirical studies, the present paper aims to explore how disadvantaged suppliers in developing countries increase their profits in the face of barriers to functional upgrading. The findings from the literature analysis suggest that the ability of disadvantaged suppliers to benefit from GVC participation depends on the extent of their managerial agency and their ability to leverage multiple upgrading/downgrading trajectories (whether product, process, or functional) and transform them into profitable outcomes. Copyright © 2017 ASAC. Published by John Wiley & Sons, Ltd.
Highlights
The University of Manchester, Alliance Manchester Business School; Lappeenranta University of Technology; Temple University, Fox School of Business
We briefly review how the concept of upgrading has been applied in the global value chains (GVCs), international business (IB), and relational economic geography (REG) literatures
X Privileged suppliers: Functional upgrading to original brand manufacturer (OBM) for a joint venture (Slovak and Dutch owners), and a small number of leading suppliers
Summary
We briefly review how the concept of upgrading has been applied in the GVC, IB, and REG literatures. One strand of the upgrading literature focuses on the power of large multinational enterprises (MNEs), their governance strategies, and the implications for developing country suppliers (Dolan & Humphrey, 2000). The fundamental question this body of literature seeks to answer is how the governance of GVCs affects the developmental outcomes for developing country suppliers. Process upgrading refers to carrying out tasks more efficiently by restructuring existing or initiating new production methods; Table 1 Functional Upgrading (FU) and Profit Margins (PM) for Domestic Suppliers in Developing Countries.
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