Supplier evolution in global value chains and the new brand game from an attention‐based view

Abstract

AbstractResearch SummarySuppliers from emerging economies have been particularly active in acquiring brands from advanced economies. We analyze changes in the global value chain (GVC) of the sports shoe industry and show how hollowing out the asset bases of brand‐holding firms through increasing outsourcing has enabled the emergence of rising power firms, as well as a new brand game and a market for brands. These developments in the GVC might be a future challenge for traditional brand‐holding lead firms. We show that managers focused on branding and distribution issues were myopic towards the strategic initiatives of suppliers. Managers need to pay attention to the potential long‐term consequences of outsourcing and offshoring activities, as suppliers could become competitors or acquirers of their order‐giving firms, leading to the question: Are we approaching a state of dual GVC leadership, or do lead firms risk being kicked out by their suppliers?Managerial SummaryWe explore the emergence of rising power firms from the peripheries of GVCs. An increasing number of major brand‐holding companies from traditionally industrialized economies have been acquired by suppliers from newly industrialized economies due to some fundamental changes. First, the emergence of a market for brands makes brands more volatile. Second, continuous outsourcing and hollowing‐out of the lead firm's asset base has reduced their ability to control the GVC. Through a longitudinal case study analysis, by adopting an attention‐based view, we investigate the behavior of the traditional lead firms. Lead firms were not only myopic to the activities of their suppliers, but their focus on downstream activities created increasing opportunity spaces upstream for rising power firms while weakening the defense capacity of brands.