There is an growing literature exploring the increasing fragmentation of production processes and the evolution of internationally-dispersed but functionally-integrated economic activities. However, most of this literature appears to neglect an important part of the story, that is the form and the organization of the relationships (the governance) among the various actors involved in these activities, and their implications for development. We develop this analysis in this paper, and explore it empirically with a new dataset on Thailand. In order to address this issue, we study global and domestic value chains in Thailand, and develop a quantitative measure of their governance, which takes into account different levels and types of buyers’ involvement with suppliers’ activities. We then use this measure to explore econometrically its relationship with suppliers’ performance. An important finding is that the relationships MNCs have with their suppliers is multifold and generally more intense than for domestic value chains. Our estimates suggest that more intense buyers’ involvement with local suppliers, not only in the definition of products’ characteristics, design and quality, but also in technology dissemination and R&D is generally associated with higher suppliers’ productivity. However, the governance of the value chain appears to affect the productivity of domestic value chains’ suppliers to a greater extent than for firms supplying MNCs or for exporters. We suggest that this result may be explained by the different nature of the information and knowledge being exchanged, and by the gaps between the leader and its suppliers.
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Paper provided by CREI Università degli Studi Roma Tre in its series Working Papers with number
0702.
Find related papers by JEL classification: F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business O14 - Economic Development, Technological Change, and Growth - - Economic Development - - - Industrialization; Manufacturing and Service Industries; Choice of Technology O33 - Economic Development, Technological Change, and Growth - - Technological Change - - - Technological Change: Choices and Consequences; Diffusion Processes
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