Value Chain Governance Research Articles

Connections and Competences in the Governance of the Value Chain: How Industrial Countries Maintain Their Competitive Advantage

The aim of our paper is to analyse the governance of value chains operating in the traditional sectors of clothing and footwear, focusing particularly on production de-localization from the Italian region of Veneto to the nearby country of Rumania After describing and �quantifying� the internationalization process between Veneto and Rumania we turn to discuss the possible consequences of this process, both for the region of origin and the recipient area. We highlight, through the concepts of linkages and competences how the production internationalization process may determine a progressive weakening of the network of linkages that characterize the home region, and discuss the main obstacles to a successful transfer of know-how and technologies to the host system. From this discussion emerges the vision of some policy measures to amplify possible positive effects and counter negative consequences of the fragmentation of production, both in the home and in the host country.

Institutional barriers to entrepreneurship in clusters

PurposeThe paper aims to highlight the extent to which the institutional context of a country can inhibit entrepreneurial activity in clusters.Design/methodology/approachCase study method employing exploratory survey questionnaire and interviews administered to 78 firms in the Denizli textile cluster in Turkey.FindingsFindings show that Denizli district firms nurture effectively only some of the features of an industrial district, that is flexibility, participative managerial structure and trust. However, there is limited availability of skilled workers, and limited co‐operation in the form of joint projects and investments for innovation owing to the weak institutional context in which these firms are embedded. Although this might be expected to discourage economic benefits, performance, particularly in terms of efficiency and relations with internal and external customers, is perceived to be high by the cluster firms.Research limitations/implicationsIt is not adequate to argue that policy makers of developing countries should take particular systems of organizing, such as cluster formation, into consideration for their industrialization efforts. One needs to consider the wider institutional context in which entrepreneurial activity is embedded that can limit the degree to which clusters can stimulate economic development. This has implications for the applicability of a cluster approach to foreign contexts, particularly where global value chain governance is of a quasi‐hierarchical form.Practical implicationsAlthough district firms can strategize on the basis of their flexibility, trust relations and managerial structures within the confines of a state‐organized institutional environment and a quasi‐hierarchical global value chain, further improvements such as relocation of production and equity participation are needed to meet the global challenge.Originality/valueThis study shows that the institutional make‐up of a country can discourage actors from changing patterns of organizing for innovation. Although a substantial number of studies have been carried out for more than a decade on the internal structure and formation of clusters, these pertain predominantly to operations in developed nations and, by and large, ignore developing countries. The paper argues that clusters may not generate the same economic benefits when embedded in weak, state‐organized institutional settings as when operating in strong collaborative institutional contexts. The study is of value particularly to policy makers.

Connections and Competences in the Governance of the Value Chain: How Industrial Countries Maintain their Competitive Advantage

The aim of our paper is to analyse the governance of value chains operating in the traditional sectors of clothing and footwear, focusing particularly on production delocalization from the Italian region of Veneto to the nearby country of Rumania After describing and quantifying the internationalization process between Veneto and Rumania we turn to discuss the possible consequences of this process, both for the region of origin and the recipient area. We highlight, through the concepts of linkages and competences how the production internationalization process may determine a progressive weakening of the network of linkages that characterize the home region, and discuss the main obstacles to a successful transfer of know-how and technologies to the host system. From this discussion emerges the vision of some policy measures to amplify possible positive effects and counter negative consequences of the fragmentation of production, both in the home and in the host country.

Civic Markets: Alternative Value Chain Governance as Civic Engagement

Civic Markets: Alternative Value Chain Governance as Civic Engagement

Quality standards, conventions and the governance of global value chains

Convention theory helps refine our understanding of the governance of global value chains through its analysis of ‘quality’. In this article, it is argued that global value chains are becoming increasingly ‘buyer-driven’, even though they are characterized by ‘hands-off’ forms of co-ordination between ‘lead firms’ and their immediate suppliers. This is because lead firms have been able to embed complex quality information into widely accepted standards and codification and certification procedures. As suggested by convention theory, their success in doing so has depended on defining and managing value chain-specific quality attributes that are attuned to broader narratives about quality that circulate within society more generally.

The governance of global value chains

This article builds a theoretical framework to help explain governance patterns in global value chains. It draws on three streams of literature – transaction costs economics, production networks, and technological capability and firm-level learning – to identify three variables that play a large role in determining how global value chains are governed and change. These are: (1) the complexity of transactions, (2) the ability to codify transactions, and (3) the capabilities in the supply-base. The theory generates five types of global value chain governance – hierarchy, captive, relational, modular, and market – which range from high to low levels of explicit coordination and power asymmetry. The article highlights the dynamic and overlapping nature of global value chain governance through four brief industry case studies: bicycles, apparel, horticulture and electronics.

Does Governance Matter? Keiretsu Alliances and Asset Specificity as Sources of Japanese Competitive Advantage

This empirical study suggests that Japanese competitive advantage in complex-product industries is at least partly due to differences in value chain governance and interfirm asset co-specialization. Comparative data are offered which indicate that U.S. firms rely largely on markets and hierarchies to facilitate exchange, whereas Japanese firms rely largely on “hybrid” governance or alliances. The empirical findings suggest that Japanese automotive firms (value chains) have been able to achieve a competitive advantage over their U.S. counterparts by effectively using hybrid/alliance governance for three primary reasons: (1) Japanese automotive value chains are characterized by greater interfirm asset co-specialization than U.S. chains. In particular, greater human asset co-specialization between firms results in superior coordination, information sharing, and learning which is critical in complex-product industries, (2) hybrids/alliances as employed by Japanese automakers realize virtually all of the advantages of hierarchy (e.g., asset co-specialization) without the disadvantages (e.g., loss of market discipline, loss of flexibility, higher labor costs), and (3) Japanese automotive value chains incur lower transaction costs than U.S. value chains. Thus, alliances, as structured in Japan, simultaneously realize the benefits of decentralization and competition without sacrificing economies of scale, coordination, or co-specialization of assets. These findings support transaction cost theories which suggest that effectively aligning governance structures with transactions will result in efficiency advantages. However, inconsistent with extant transaction cost theory, findings from this study suggest that: (1) hybrid governance may be more efficient than hierarchical governance under conditions of uncertainty, and (2) transaction costs do not necessarily increase with an increase in asset specificity.