Lead Firms Research Articles

Global value and wealth chains in contemporary capitalism: Editorial introduction

This introduction to a special section on global value chains and global wealth chains elaborates on the concept of entanglement as a way to understand dynamics of value capture, accumulation and inequality in contemporary capitalism. The authors first review the analytical framework they have proposed for analyzing entangled chains based on two dimensions: 1) the relative importance of intangible versus tangible assets; and (2) the primary strategy of lead firms – specifically, whether that strategy is oriented towards value creation or wealth accumulation activities. They then briefly discuss the four papers comprising this special section which collectively advance our knowledge of how production and finance are imbricated in the global political economy.

Sustainability Strategies in Clusters and the Role of Communication

Environmental sustainability impacts on industrial districts and their lifecycle evolutionary processes. Nevertheless, research in this direction is scant, suggesting on the one hand, the role of lead firms of global value chains and, on the other hand, potential contributions of suppliers. e paper explores how district firms have invested in sustainability by analyzing sustainable-oriented communication strategies (certification, web, exhibitions) of Italian leather and jewelry clusters. Results show that districts are evolving by including sustainability in their strategies. A variety of sustainability strategies emerge among district firms, with differences also between firms in B2B and B2C markets.

Power and coordination: Governance in the poultry regional value chain in Southern Africa

ABSTRACT There is a growing body of literature exploring governance in regional value chains (RVCs) in Africa. Agro-processing RVCs are of particular interest, as this is where the manufacturing capabilities of most African countries lie. The research on RVCs in Africa highlights governance by lead firms and government actors as an important aspect in determining the structure and outcomes within these RVCs. Using the global value chain (GVC) analytical framework, this article analyses governance in the poultry RVC in South Africa, Zambia and Zimbabwe. The paper finds that the poultry RVC is a bilateral oligopoly, where the lead firms are supermarkets and large poultry producers with exclusive rights to multi-territorial breeding rights. The article highlights that both large producers and the supermarkets play an important role in the formation and structure of the poultry RVC, with important implications for regional integration and industrialisation.

New Sites of Accumulation? Why Intangible Assets Matter for Energy Transitions

ABSTRACT Energy transitions break geographic monopolies on fossil fuel resources and are expected to redistribute economic benefits to new actors, from local communities to developing countries. At the same time, basing energy systems around renewables increases the importance of intangible assets such as data and artificial intelligence (AI). As different IPE approaches have shown, such intangibles can be monopolized by lead firms and especially Big Tech, which increasingly provide crucial digital infrastructures. This paper therefore asks what role Big Tech firms may play in energy systems, and whether their access to intangibles enables them to expand to the energy sector. The case study of Amazon illustrates that data-driven intellectual monopolies are well-positioned to expand into energy, benefitting from their position as providers of data infrastructures, and capacities in data harvesting and analysis. Amazon is both developing and marketing its own innovations, and investing in energy systems businesses. As intangibles gain importance in energy systems, possible implications for the IPE of energy include power and economic value flowing towards Big Tech, rather than countries or communities.

Production Networks and Innovation in the Semi-periphery: The Transition to Electric Vehicles in South Korea and Spain

AbstractWhat determines the ability of firms based in New Advanced Economies to generate innovation in the transition to electric vehicles (EVs)? Under what conditions are they more likely to break with their established pattern as fast followers to create innovation that is new to the world? To address these questions, we introduce a meso-level framework focused on the organization of global production networks. The framework examines three aspects of such networks: the position of the firm within the network, the number of lead firms, and the links between lead firms and suppliers. We illustrate the explanatory power of our framework through the cases of South Korea and Spain, the two New Advanced Economies with the largest automotive sectors. We characterize Korea’s production network as a unipolar, captive structure and Spain’s as part of an EU-wide multipolar, modular production network. We argue that contrary to common perceptions, Korea’s structure delayed the transition to EV’s and strengthened Korea’s role as a fast follower. Meanwhile, Spain’s embeddedness in the EU production network offered significant opportunities for turnkey suppliers to generate novel innovation despite the absence of a domestic lead firm.

Governing innovation-driven development under state entrepreneurialism in China

While global production networks stress the role of lead firms, state entrepreneurialism highlights the role of the state in governing innovation-driven development. However, there is a gap in understanding how the state institution configures and operates to achieve its strategic development goals. This paper fills this gap by examining market means of park management. It shows that Zhangjiang Science City in Shanghai reinvented its development agency – a park development corporation to mobilize finance and govern development. Jiangbei in Nanjing focused on coupling with a multinational lead firm – the Taiwan Semiconductor Manufacturing Company. Rather than thinking of innovation governance as state-commanded, we reveal they are market-based operations. At the same time, they extend the state capacities into industrial governance.

Governance of intersecting value chains in an era of polycentric trade: the case of Kenyan fresh fruit and vegetables

Abstract Domestic value chains (DVCs) led by retailers within the global South often overlap with global value chains (GVCs) as well as domestic arm’s length markets. DVCs incorporate some private governance, but we know little about the role of public governance. Based on analysis of Kenyan fresh fruit and vegetables, we ask: How is the power (or ability) of lead firms to govern producers being reshaped by the increased complexity of polycentric trade in the Kenyan horticultural sector? We reveal constraints to lead firms’ ability to directly exercise bargaining power; and shifts towards institutional power in a context of polycentric trade.

State–Firm Nexus, Indigenous Coupling, and Social Downgrading in the Aerospace Global Production Network: A Case Study of Embraer, Brazil

Global production network (GPN) scholars increasingly focus on examining exclusionary processes in strategic coupling. However, attention has been given to structural coupling, where uneven outcomes often evolve through lead firms exploiting power asymmetries to foster their interests over regions. Functional and indigenous coupling, although acknowledged to have exclusions, are considered to be less likely for such outcomes due to assumed symmetrical power. This assumption has led to a lack of studies exploring not only how uneven outcomes evolve in indigenous coupling but also what territorial mechanisms are involved. This article addresses this gap by conceptualizing the notion of a statist transnational community (STC) as a crucial mechanism in indigenous coupling, and with potential to explain how asymmetrical relations can emerge and foster exclusionary processes. Based on qualitative methods, this article analyzes Brazil's integration into the aerospace GPN through indigenous coupling. First, it examines how the Brazilian developmental state, under a national developmental ideology, fostered coupling in São José dos Campos (SJC) by establishing institutions, regional assets, Embraer, and an aerospace industrial cluster. Second, it elucidates how the Brazilian state facilitated the formation of an STC crucial in establishing firms and creating and harnessing regional assets. Additionally, it reveals how and why the SJC STC is marked by relative symmetrical and cooperative relations, and encourages collaboration. Lastly, this article investigates a training partnership between Embraer and the Aeronautics Institute of Technology in SJC, disclosing how asymmetrical power relations can also be present in indigenous coupling, fostering social downgrading, especially in relation to labor.

Financing needs, financing environment and over-disclose innovation information

ABSTRACT Innovation information is an important way for external investors to understand a firm’s innovation capability and future value. Using Chinese A-share listed companies from 2011 to 2021, we examine whether financing needs lead firms to over-disclose innovation information (OII) in their annual reports. The findings indicate that firms with higher financing needs tend to OII. Heterogeneity analysis reveals that the facilitating effect of financing needs on OII is more pronounced among non-state-owned, small, and declining firms, suggesting that heterogeneity of firms’ financing environment is an important moderator of financing needs’ influence on corporate OII.

Critical perspectives on GVC theory: uncovering GVC resilience through non-lead power

Critical perspectives on GVC theory: uncovering GVC resilience through non-lead power

The End of Globalized Production? Supply-Chain Resilience, Technological Sovereignty, and Enduring Global Interdependencies in the Post-Pandemic Era

This article assesses the impact of the COVID-19 pandemic, the war in Ukraine and geopolitics on geographies of production. Criticizing simplified perspectives on globalized versus intraregional production, we stress the multi-scalarity, the role of industrial policies and sector-specific path dependencies in shaping global production. Based on expert interviews and policy and industry documents, our analysis focuses on the automotive, clothing, and electronics industries. Although concerns for resilience increasingly shape lead firms’ strategies, increased regionalization of production through re- or near-shoring is only one of several strategies. Where it does occur, it has been driven by state policies that tackle certain strategically important products, not production networks as a whole. Hence, while recent events exposed the vulnerabilities of global production, we do not observe deglobalization in the sense of a comprehensive retreat from globalized in favor of intraregional production. Nonetheless, state interventions that are geopolitically motivated and affect firms’ investment decisions have intensified particularly in the United States and the European Union.

Fashion designers as lead firms from below: Creative economy, state capitalism and internationalization in Lagos and Nairobi

African fashion reveals intersections between upgrading, manufacturing and internationalization alongside expanding cultural, political and social influence. Yet global value chain analyses of the industry reinforce a core-periphery dynamic with the location of lead firms in the Global North (GN) and actors lower down the value chain in the Global South (GS). This disappears GS actors in the creative economy, including fashion designers, who innovate, design and cultivate the brand followership associated with lead firms. This paper analyzes fashion designers in Lagos and Nairobi as economic, cultural and social value creators and therein lead firms from below (LFfB). It conceptualizes this dynamic, with a focus on lead firms within the global value chain framework that combines elements of conceptual interventions on state capitalism to offer the LFfB framework. The framework is deployed to analyse primary data from fashion design firms in two key hubs, Lagos and Nairobi. Findings demonstrate the significance of synergies between key areas of LFfB operation (research and development, inputs, distribution, sales and product design) and state capitalism’s support for production, trade and finance, as well as positive returns through international cultural recognition and national profile building. Nevertheless, the paper contends that challenges of state (in)action can undermine sustainable practices, competitiveness as well as multi-scalar internationalization.

The financialization of healthcare

In contemporary capitalism, finance has extended its reach to encompass a growing array of economic sectors traditionally associated with public provisioning or social policy, with healthcare emerging as a prominent domain where fictitious capital has flourished. Financialization exerts a direct influence on the delivery of public health services while also reshaping the behavior and operations of private healthcare providers and health insurance firms. This paper aims to characterize the process of financialization of healthcare in Brazil by analyzing the behavior of firms in the private health insurance market from 2007 to 2019. These firms provide healthcare coverage alongside the functioning of the Unified Health System (SUS), constituting an avenue for the accumulation of capital. The paper analyzes how the strategies for managing assets, liabilities, and the equity of leader firms operating in the market of private healthcare plans firms, as expressed by the movements recorded in their balance sheets, inform us on their process of financialization. A set of financialization indexes is developed, addressing: (i) asset financialization; (ii) liability financialization; and (iii) the maximization of shareholder value. Economic-financial data and financial statements made available by the Brazilian Regulatory Agency for Private Health Insurance (ANS) are used to build such indexes. The results show a greater engagement of leader firms in the allocation of their resources in financial assets, but the weight of financial gains in total profits is small. Regarding indebtedness, results do not show an increase in leverage and financial burden, and does not confirm the hypothesis of increased susceptibility to creditor influence. Finally, changes in the equity structure and initial public offerings suggest a greater alignment of management practices with the standards of corporate governance established in capital markets. We conclude that those firms are increasingly serving as platforms for the financial accumulation of other economic agents and set a research agenda on this topic.

The value and structuring role of web APIs in digital innovation ecosystems: The case of the online travel ecosystem

Interfaces play a key role in facilitating the integration of external sources of innovation and structuring ecosystems. They have been conceptualized as design rules that ensure the interoperability of independently produced modules, with important strategic value for lead firms to attract and control access to complementary assets in platform ecosystems. While meaningful, these theorizations do not fully capture the value and structuring role of web APIs in digital innovation ecosystems. We show this with an empirical study of the online travel ecosystem in the 26 years (1995–2021) after the first Online Travel Agencies (OTAs) were launched. Our findings reveal that web APIs foster a dynamic digital innovation ecosystem with a distributed networked structure in which multiple actors design and use them. We provide evidence of an ecosystem where decentralized interfaces enable decentralized governance and where interfaces establish not only cooperative relationships, but also competitive ones. Instead of locking in complementors, web APIs enable the integration of capabilities from multiple organizations for the co-production of services and products, by interfacing their information systems. Web APIs are important sources of value creation and capture, increasingly being used to offer or sell services, constituting important sources of revenue.

Social Differentiation and Household Dynamics Associated with Early Season Shea Nut Collection and Trading in Burkina Faso

Originally a domestic product used by West African rural population, shea nut has become an international commodity exported all over the world. However, local periodic markets remain a central site of exchange and nut trading for many women shea nut collectors in Burkina Faso. Using survey data from Burkina Faso, this paper explores the ways in which shea nut collectors navigate shea nut trading. Many collectors engage in early nut trading during the farming season to cover their household subsistence needs, despite the lower shea nut price at that time of the year. The results show that this early market consists mostly of better off shea nut collectors buying nuts from worse off collectors, as the lead firms and wholesalers tend to enter the market later in the season. While the exchanged volumes remain small, this highlights social differentiation among women shea nut collectors, as the better-off collectors are able to invest their shea income in other sources of income, while the other collectors rely on shea for their reproduction needs. Furthermore, this social differentiation is also reflected in different household dynamics and bargaining strategies between spouses, as better-off collectors tend to collaborate to a larger extent with their partners than the other collectors.

Novel R&D Capabilities as a Response to ESG Risks-Lessons From Amazon’s Fusion of Diverse Knowledge

Environmental, Social, and Governance (ESG) management is essential for transforming corporate financial performance-oriented business strategies into Finance (F) + ESG optimization strategies to achieve the Sustainable Development Goals (SDGs). In this trend, the rise of ESG risks has divided firms into two categories. Former incorporates a growthmindset that creates a passion for learning, and urges it to improve itself by endeavoring Research and development (R&D) -driven challenges, while the other category, characterized by risk aversion, avoids challenging highly uncertain R&D activities and seeks more manageable endeavors. This duality underscores the complexity of corporate R&D strategies in addressing ESG risks and necessitates the development of novel R&D capabilities for corporate R&D transformation strategies towards F + ESG optimization. Building on this premise, this paper conducts an empirical analysis, utilizing reliable firms data on ESG risk and brand value, with a focus on 100 global R&D leader firms. It analyzes R&D and actions for ESG risk mitigation, and assesses the development of new functions that fulfill F + ESG optimization through R&D. The analysis also highlights the significance of network externality effects, with a specific focus on Amazon, a leading R&D company, providing insights into the direction for transforming R&D strategies towards F + ESG optimization. The dynamics of stakeholder engagement in F + ESG optimization are indicated with the example of amazon's activities. Through the analysis, it became evident that Amazon's capacity encompassing growth and scalability, specifically its ability to grow and expand, is accelerating high-level research and development by gaining the trust of stakeholders in the "synergy through R&D-driven ESG risk mitigation." Finally, as examples of these initiatives, the paper discussed the Climate Pledge led by Amazon and the transformation of Japan's management system.

Rethinking the dynamic of global production networks: Integrate the influence of suppliers and towards a flexible strategy making causal mechanism

AbstractThe global production network (GPN) 2.0 framework mainly considers the organizational capabilities of lead firms, neglecting the influence of supplier capabilities on the strategic making of lead firms. I argue that the GPN 2.0 framework must integrate the influence of supplier capabilities (both industrial and individual firm levels) to better explain the organization of the global economy. Industrial‐level capability determines the possible strategic choices that firms may make under certain dynamic combinations, whereas the individual firm level determines the geographic extension direction of GPNs. Therefore, this study incorporates the influence of suppliers and builds a more flexible strategy‐making causal mechanism other than the definitive and limiting causal mechanism in GPN 2.0. I hope this article can promote the further development of GPN 2.0 and convey some valuable concepts to make it perform better in deconstructing the organization of the global economy in the real world.

Global Value Chain Governance Dynamics: A Co-Evolutionary Perspective on the Transition from Relational to Modular Governance in Construction

Global value chain (GVC) governance theory explains how GVCs are controlled and organised. A large body of research examines how GVC governance varies across industries, however, GVC governance dynamics within industries receive less attention. This study bridges the gap between GVC and international business theories to focus on GVC governance heterogeneity as a source of competitive advantage. Through mixed-methods including grounded theory, structural equation modelling, and comparative case studies, the research reveals the interplay between network-orchestration and network-dependence as lead firms shape GVC governance transitions. Insights can help managers optimise complex GVC governance structures, particularly in the context of digitalisation.

The Financialization of Coffee, Cocoa and Cotton Value Chains: The Role of Physical Actors

ABSTRACTThe prices of cash crops impact the livelihoods of millions of households in developing countries. While the influence of speculators on global commodity prices determined through derivatives exchanges is extensively discussed, the contribution of hedgers to short‐term changes in futures prices has largely been disregarded in the financialization of commodities discourse over the past two decades. This results in a failure to account for the interconnected activities of increasingly consolidated lead firms within physical global value chains (GVCs) and derivatives markets. This article examines the pricing and hedging strategies of lead firms in the coffee, cocoa and cotton GVCs in relation to their activities on commodity derivatives markets. Based on Open Interest data as an indicator of derivatives markets activity, a measure of buying and selling pressure by trader categories is applied in a Generalized ARCH (GARCH) model. The findings of this article show that hedgers’ activities allow speculators to drive global benchmark prices so that they can benefit through combinations of financial hedging and physical trading strategies. As these practices of lead firms contribute to the transmission of futures prices along GVCs, smallholders and other actors in cash crops in producer countries are exposed to heightened price changes.

Strategic coupling, cross‐scalar tension and local upgrading in the globalizing automotive industry in Guangzhou, China

AbstractThis paper examines how latecomer firms manage to achieve industrial upgrading through strategic coupling with global lead firms in automotive production networks. Drawing upon the example of the Guangzhou Automotive Corporation in southern China, this paper theorizes ‘cross‐scalar tension’ as a key factor to explain why the four cases of strategic coupling between lead firms, the same domestic firm and state ended in different results, from decoupling to a sustainable coupling with local upgrading. This paper contributes to the pertinent literature by demonstrating that cross‐scalar tension is inherent to the nature of global production networks, and unreconciled tension concerning different corporate strategies on technological transfer, localization and product development could lead to decoupling. Importantly, good coordination and matching on corporate strategies between lead and domestic firms could relieve cross‐scalar tensions, thus fostering local industrial upgrading and sustainable strategic coupling.