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What lies between market and hierarchy? Insights from internalization theory and global value chain theory

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  • Roger Strange

    (University of Sussex)

  • John Humphrey

    (University of Sussex)

Abstract

In this paper, we suggest that internalization theory might be extended by incorporating complementary insights from GVC theory. More specifically, we argue that internalization theory can explain why lead firms might wish to externalize selected activities, but that it is largely silent on the mechanisms by which those lead firms might exercise control over the resultant externalized relationships with their GVC partners. We advance an explanation linking the choice of control mechanism to two factors: power asymmetries between the lead firms and their GVC partners, and the degree of codifiability of the information to be exchanged in the relationship.

Suggested Citation

  • Roger Strange & John Humphrey, 2019. "What lies between market and hierarchy? Insights from internalization theory and global value chain theory," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 50(8), pages 1401-1413, October.
    • Handle: RePEc:pal:jintbs:v:50:y:2019:i:8:d:10.1057_s41267-018-0186-0
    DOI: 10.1057/s41267-018-0186-0
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