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Power Relationships along the Value Chain: Multinational Firms, Global Buyers, and Local Suppliers' Performance

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  • Carlo Pietrobelli
  • Federica Saliola

    () (Department of Law, Università degli Studi Roma Tre)

Abstract

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.

Suggested Citation

  • Carlo Pietrobelli & Federica Saliola, 2007. "Power Relationships along the Value Chain: Multinational Firms, Global Buyers, and Local Suppliers' Performance," Working Papers 0702, CREI Università degli Studi Roma Tre, revised Jan 2007.
  • Handle: RePEc:rcr:wpaper:07_02
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    File URL: http://host.uniroma3.it/centri/crei/pubblicazioni/workingpapers2007/CREI_02_2007.pdf
    File Function: First version, 2007
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    References listed on IDEAS

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    5. Kamal Saggi, 2002. "Trade, Foreign Direct Investment, and International Technology Transfer: A Survey," World Bank Research Observer, World Bank Group, vol. 17(2), pages 191-235, September.
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    8. Giuliani, Elisa & Pietrobelli, Carlo & Rabellotti, Roberta, 2005. "Upgrading in Global Value Chains: Lessons from Latin American Clusters," World Development, Elsevier, vol. 33(4), pages 549-573, April.
    9. John Humphrey & Hubert Schmitz, 2002. "How does insertion in global value chains affect upgrading in industrial clusters?," Regional Studies, Taylor & Francis Journals, vol. 36(9), pages 1017-1027.
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    11. Beata Smarzynska Javorcik, 2004. "Does Foreign Direct Investment Increase the Productivity of Domestic Firms? In Search of Spillovers Through Backward Linkages," American Economic Review, American Economic Association, vol. 94(3), pages 605-627, June.
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    14. Andrea Morrison & Carlo Pietrobelli & Roberta Rabellotti, 2006. "Global Value Chains and Technological Capabilities: A Framework to Study Industrial Innovation in Developing Countries," KITeS Working Papers 192, KITeS, Centre for Knowledge, Internationalization and Technology Studies, Universita' Bocconi, Milano, Italy, revised Dec 2006.
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    Citations

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    Cited by:

    1. Alina Florentina Avrigeanu & Flavia Gabriela Anghel & Elena Radu, 2010. "PLUSES AND MINUSES OF BEING IN A GLOBAL VALUE CHAIN – THE CASE OF ROMANIAN APPAREL SMEs," JOURNAL STUDIA UNIVERSITATIS BABES-BOLYAI NEGOTIA, Babes-Bolyai University, Faculty of Business.
    2. Pietrobelli, Carlo & Rabellotti, Roberta, 2011. "Global Value Chains Meet Innovation Systems: Are There Learning Opportunities for Developing Countries?," World Development, Elsevier, vol. 39(7), pages 1261-1269, July.
    3. Andrea Morrison & Carlo Pietrobelli & Roberta Rabellotti, 2006. "Global Value Chains and Technological Capabilities: A Framework to Study Industrial Innovation in Developing Countries," KITeS Working Papers 192, KITeS, Centre for Knowledge, Internationalization and Technology Studies, Universita' Bocconi, Milano, Italy, revised Dec 2006.
    4. Carlo Pietrobelli, 2009. "Dualism and Power in Agriculture Scientific and Technological Development," QA - Rivista dell'Associazione Rossi-Doria, Associazione Rossi Doria, issue 1, March.

    More about this item

    Keywords

    North-South; Keywords: Global Value Chains; Multinational Corporations; Foreign Direct Investment; Upgrading; Productivity;

    JEL classification:

    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • O14 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Industrialization; Manufacturing and Service Industries; Choice of Technology
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes

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