Journal of World Business 55 (2020) 101067

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Journal of World Business

journal homepage: www.elsevier.com/locate/jwb

Global value chain governance: Intersections with international business T

a b b c,d,
Sarah E. McWilliam , Jung Kwan Kim , Ram Mudambi , Bo Bernhard Nielsen *
a
The University of Sydney, Australia
b
Temple University, Philadelphia, PA, 19122, USA
c
The University of Sydney, Australia
d
Copenhagen Business School, Denmark

ARTICLE INFO ABSTRACT

Keywords: The international business (IB) literature has always analyzed multinational enterprises (MNEs) as firms that
Global value chains internalize market transactions across national borders. Over the last few decades, these firms have evolved from
Governance vertically integrated organizations to network orchestrators that coordinate geographically dispersed economic
Eclectic paradigm activities. In other words, they are the primal actors within global value chains (GVCs). Despite the commonality
Multinational enterprises
of their objects of study, the incorporation of GVC research into mainstream IB remains embryonic and frag-
Externalization
Global factory
mented. This review uses the lens of the eclectic paradigm to funnel disconnected strands of the GVC governance
Outsourcing literature from multiple disciplines into a coherent framework. Based on a systematic examination of 143 the-
Polarity oretical and empirical studies, we scrutinize the theory, methods and empirical evidence to promote a more
Co-evolution structured integration of GVC governance into future IB research.

1. Introduction (Hopkins & Wallerstein, 1977), to focus more on inter-organizational

Global value chains (GVCs) stitch together economic activities from
multiple geographically dispersed locations by leveraging the com-
parative advantage of each. Supported by underlying technological and
economic forces, GVCs have risen to prominence by transforming pat-
terns of global interconnectedness (World Bank & World Trade
Organization, 2019). To a large extent, they are orchestrated and op-
erated by complex networks of multinational enterprises (MNEs), and
thus have become essential features of the international business (IB)
landscape.
The resultant “GVC economy” is structurally different to its pre-
decessors, dominated by trade in intermediate rather than finished
goods and services, with trade patterns that are more evenly distributed
across the global north and south divides (Gereffi, 2018, p. 431). As a
result, there is now a higher degree of interconnectedness between
countries at all levels of development (Backer & Flaig, 2017; OECD,
2013). It is therefore not surprising that the literature on GVC gov-
ernance explains the control and organization of MNEs in ways that
complement and extend existing IB theories.
GVC theory broadly offers an “outside-in” or network-to-firm per-
spective on the role of MNEs and the structure of their global activities.
This view was developed as Gereffi (1994) reframed discussions about
globalization and interconnectedness from world systems theory
relationships and the geographical dispersion of value chain activities.
In GVC literature, as in the global commodity chain (GCC) literature
that preceded it (Gereffi, 1994), governance refers to the relative power
and coordinating relationships among participating firms. In the related
global production network (GPN) literature, however, governance refers
to the institutional and regulatory arrangements shaping interactions
between the production network and the external environment (e.g.
Coe & Yeung, 2015).
Together, these perspectives contribute to a “systemic view” of the
set of activities and relationships that constitute the value chain. In an
attempt to accommodate both, we propose an integrated definition of
GVC governance as the organization and control of GVCs. Within this,
organization refers to the structure and characteristics of inter-firm re-
lationships across value chain nodes; while control derives from the
power dynamics between firms as well as from institutional and market
forces. Changes within these mechanisms for the organization and
control of GVCs are critical determinants of dynamics in network
structures and of outcomes for firms and locations. This systemic view
is valuable to IB because it captures the organizational mechanisms
through which lead MNEs exert control over externalized activities
(Benito, Petersen, & Welch, 2019), and how such mechanisms can
shape interactions with the external environment.
In contrast to GVC theory, IB offers an “inside-out” or firm-to-

⁎
Corresponding author at: The University of Sydney, NSW, 2006, Australia.
E-mail address: bo.nielsen@sydney.edu.au (B.B. Nielsen).

https://doi.org/10.1016/j.jwb.2019.101067
Received 14 December 2018; Received in revised form 21 November 2019; Accepted 21 November 2019
Available online 24 December 2019
1090-9516/ © 2019 Elsevier Inc. All rights reserved.
S.E. McWilliam, et al.
network perspective on MNEs, developed through theories of inter-
nationalization such as internalization theory (Buckley & Casson, 1976)
and related entry mode studies (Agarwal & Ramaswami, 1992).
Therefore, the nature of external control mechanisms is currently less
explicit in IB literature. The global factory literature illustrates this,
conceiving governance in relation to the control and location decisions
exercised by managers within a focal firm (Buckley & Strange, 2015). It
is important to note that IB literature has not overlooked trends driving
greater emphasis on external networks, with a wide acknowledgement
of alliance capitalism (Dunning, 1995), strategic outsourcing (Quinn &
Hilmer, 1994), offshoring (Grossman & Rossi-Hansberg, 2008) and the
disaggregation of the value chain (Mudambi, 2008). However, while
the IB literature has explained why lead firms might externalize parti-
cular activities, it has less to say about the mechanisms through which
they control the resultant externalized relationships with GVC partners
(Strange & Humphrey, 2018).
Both the IB and GVC literatures extend across macro to micro levels
of theory and analysis. The breadth and potential for complementary
interdisciplinary studies are therefore vast. Accordingly, this review
suggests a macro-to-micro approach that can meaningfully funnel dis-
connected strands of the GVC governance literature from multiple
disciplines into a coherent framework. To this end, we draw on the
eclectic paradigm developed by Dunning (1977), which has previously
been identified as a “meta-framework for the cross-disciplinary analysis
of international business” (Cantwell, 2015, p. 1). Drawing on the co-
herent structure of the eclectic paradigm, we aim to enable scholars to
think more systematically about the intersections between IB and GVC
governance literature. Our analysis of the strengths and weaknesses at
these intersections serves to guide future research.
1.1. The eclectic paradigm and GVC governance
Within IB literature, the eclectic or OLI paradigm is considered one
of the most dominant theoretical concepts for explaining the extent,
pattern and geographic dispersion of a MNE's foreign value-adding
activity. It is structured around three sub-paradigms related to owner-
ship advantages (O), location advantages (L) and internalization ad-
vantages (I) developed over three decades of research (Dunning &
Lundan, 2008; Dunning, 1977, 1989; Dunning, 2000). Together, the
OLI components provide a structure for consolidating and applying
various kinds of IB theories (Dunning, 2000). Broadly, O advantages
relate to why firms engage in international activities; L advantages re-
late to where firms engage; and I advantages relate to how firms orga-
nize the respective foreign activities (Eden & Dai, 2010). We draw on
the eclectic paradigm not only for its macro-level structure, but also for
its rich underlying theory, which offers sufficient breadth, depth and
specificity to focus multiple streams of future interdisciplinary research.
Examining GVC governance literature through the lens of “O”, “L”
and “I” offers benefits to both GVC and IB fields. For GVC literature, the
development of the field has been characterized by a great unevenness
and “theoretical eclecticism” (Gibbon, Bair, & Ponte, 2008). Existing
research has emphasized the role of participation in GVCs for economic
development in emerging economies (Lee & Gereffi, 2015), and pre-
dominantly relied on transaction cost economics to explain GVC gov-
ernance (Gereffi, Humphrey, & Sturgeon, 2005). As a result, the extant
literature attributes the governance of GVCs to three main factors: (1)
transaction complexity; (2) codifiability of production knowledge; and
(3) supplier capabilities (Gereffi et al., 2005). Notably absent from
these determinants is the lead firm’s agency on GVC governance mode.
Other potential determinants that are not explicitly discussed include
the effects of host country institutional configurations, although these
may be implied as an underlying factor of transaction complexity. GVC
governance literature is deliberately narrow in its focus on explaining
inter-firm relationships and has been successful in achieving wide ac-
claim for the resultant theoretical clarity (e.g. OECD, 2008; WTO,
2017). We interpret this narrow focus as an emphasis on “I” above the
2
Journal of World Business 55 (2020) 101067
other components of the OLI framework.
However, GVC governance literature has been criticized by some
scholars for this narrowness. An under-emphasis of O advantages is
suggested by the limited scope of GVC research that looks “inside the
firm” (Coe, Dicken, & Hess, 2008, p. 277) or that studies how govern-
ance processes can be driven by firm-level strategy and capitalist dy-
namics (Yeung & Coe, 2015). The call for more attention to how GVCs
are “unequivocally grounded in the environment”; and how location-
specific institutions, such as government regulations or civil society
organizations, can be integrated and interactive parts of the system
rather than “external forces” (Coe et al., 2008, pp. 278, 280) suggests
that this literature also under-emphasizes L advantages.
For IB, a major benefit of examining GVC governance through the
OLI lens is illustrated by Strange and Humphrey (2018), who argue that
internalization theory (related to “I”) should draw on GVC literature to
explain the mechanisms for control of externalized relationships.
However, as highlighted by Benito et al. (2019, p. 1419), a shortfall of
focusing on how GVCs relate to internalization theory is “the inability”
to effectively deal with the dynamics of international operations. This is
where we see the strength in the OLI approach. We therefore consider
how GVC governance research also offers valuable contributions to our
understanding of O and L advantages, and importantly, to the dynamic
interactions between these components. The interrelationships between
the sub-paradigms illustrate the reciprocity and interplay between all
three of the OLI components (Dunning, 1980). Dynamics arising from
interaction effects among the variables have been a consistent focus in
IB research (e.g. Brouthers, Brouthers, & Werner, 1996; Brouthers,
Brouthers, & Werner, 1999; Buckley & Hashai, 2009; Dunning, 1988).
Our review extends this focus by reframing OLI interactions to more
explicitly encompass the control mechanisms for externalized re-
lationships.
Accordingly, to achieve its aim of enabling scholars to think more
systematically about intersections between IB and GVC governance, this
study draws on the macro-level OLI framework to organize and analyze
existing multidisciplinary theoretical and empirical studies. The ob-
jectives underlying this aim are fourfold: (1) to review the content and
underlying theory of the multidisciplinary literature on GVC govern-
ance; (2) to develop an integrative framework structured in relation to
OLI and GVC theories; (3) to synthesize findings relating to each OLI
component and the interplay between them; and (4) to clarify what the
findings reveal about disciplinary strengths, weaknesses and the agenda
for a more coherent understanding of GVC governance in future re-
search.
2. Research design
To systematically review the intersections between IB and GVC
governance, we conducted a qualitative content analysis of an inter-
disciplinary selection of articles that self-identify as studies of GVC or
GPN governance. The qualitative content analysis approach helps us
examine topics for which it would be difficult to obtain and access
quantitative data (Gaur & Kumar, 2018). The content analysis intersects
qualitative and quantitative traditions to promise rigorous exploration
of issues within management research that are “difficult to study”
(Duriau, Reger, & Pfarrer, 2007). The method supports both holistic
interpretation and conceptual development (Koveshnikov, Tienari, &
Piekkari, 2018; Welch, Piekkari, Plakoyiannaki, & Paavilainen-
Mäntymäki, 2011).
2.1. Selection of articles
To systematically evaluate the theory, methods and empirical evi-
dence (see Nielsen, Asmussen, & Weatherall, 2017) in the GVC gov-
ernance literature, we compiled a database of relevant articles that
examine the nature of governance within global value chains and
production networks. Given the interdisciplinary nature of the topic, we
S.E. McWilliam, et al. Journal of World Business 55 (2020) 101067

strove to be as comprehensive as possible by including studies from a %), and a mix of other social science subjects making up the remainder
variety of business, economics, geography, urban planning, and re- (19 %). We found that over time, the output of articles has been sig-
gional development journals. We did not initially limit the number of nificantly increasing. Yet, the distribution in Fig. 1 suggests that the
journals to ensure we captured adequate studies. To identify relevant contribution from IB may not be increasing in line with other dis-
articles, we consulted recent reviews and special issues (e.g. Gibbon ciplines.
et al., 2008), and explored electronic databases with a variety of Boo-
lean searches including global value chain AND governance; global pro-
2.2. Analyses
duction network AND governance; global commodity chain AND govern-
ance; global factory AND governance. As such database searches can
Our qualitative analysis of the content and underlying theory within
overlook important studies, we also adopted the snowball search
our sample of 143 articles was conducted through a multistep ap-
technique (Greenhalgh & Peacock, 2005) using study bibliographies to
proach. First, we documented the general characteristics of each article.
identify additional relevant research. We included studies that dis-
These included the disciplinary domain, the type of article (review,
cussed GVC governance theoretically as well as in relation to empirical
conceptual or empirical), the type of empirics (qualitative or quanti-
studies. We deliberately did not expand our sample into what we de-
tative), the chain or network approach (GCC, GVC, GPN, global factory,
termine as related fields such as the offshoring, outsourcing, partner-
other) and the main contribution. As part of this first stage, we used
ships and alliance literature. Rather, we sought articles’ that self-iden-
keywords and abstracts to establish a preliminary list of recurrent topics
tified with GVC or GPN governance to examine extant theoretical
and theories related to GVC governance. We then began grouping our
integration. This approach supports clear insights into where the lit-
preliminary list of topics and theories in relation to the OLI sub-para-
eratures intersect and where there are gaps, while also focusing the
digms.
scope of the review. Our preliminary search revealed approximately
Second, through careful reading of each article, we classified the
205 studies. We analyzed the abstracts of these articles and excluded 57
sample of 143 articles into OLI categories based on our coding of
where the article had inadequate or only passing reference to GVC
common topics within the article content. The list of topics within the
governance. For example, because the discussion emphasized applied
coding scheme was not considered fixed, but rather evolved with our
regional development policy perspectives, technical aspects of stan-
detailed analysis. Although this coding stage distinguished between
dards and regulations, or other less directly associated topics such as
primary and secondary topics within the content, for clarity our sub-
migration or international trade partnerships. Our final selection in-
sequent analyses focus on the primary content. Where articles split their
cluded 143 peer-reviewed journal articles spanning from 1986 to 2018,
primary focus across two or more topics, this was also recorded to
listed in full in Appendix 2 and marked with asterisks (*) in the re-
ensure we could distinguish between studies focused on a single OLI
ference list.
sub-paradigm and those with a “dyadic” or “triadic” focus. We define
Within the final sample, the largest proportion of articles (37 %) are
dyadic studies as articles with a primary focus that spans two OLI ele-
in the management subject area. Articles in IB journals are a subset of
ments; triadic studies have a primary focus spanning all three.
these (13 % of the total). Other prominent subject areas are planning
The third and final stage of analysis involved re-examining each
and development (16 %), economic geography (15 %), economics (13
article to identify the explicit discussion of underlying theory. Similar to

Fig. 1. Annual distribution of articles by scholarly domain.

3
S.E. McWilliam, et al.
Table 1
Classification of GVC governance topics in relation to OLI.
O L
Key topics Supplier / lead firm capabilities
Codifiability of information
Transaction complexity
Private governance
Actor strategies
Division of labour
Distribution of value
Allocation of risks
Upgrading / downgrading
Supplier internationalization
Performance
Innovation
Knowledge transfer
Key theories Resource based view
Knowledge based view
Competence based view
Dynamic capabilities
the content coding, our list of key theories evolved with the analysis.
Once the final coding scheme was clear, we reviewed our organization
of each topic and theory in relation to the eclectic paradigm as in-
dicated in Table 1. Using this structure enabled us to review the extent
to which each of the sub-paradigms was represented across our sample
of GVC governance articles. We were also able to validate our coding
decisions by conducting this theory-coding exercise separately from the
content-coding, comparing how well each coding system aligned in
terms of the OLI classifications assigned to each article. When the OLI
classification derived from theory was cross-referenced to that derived
from primary and secondary coding, no conflicts arose. The final coding
scheme for topics and theories is set out in Appendix 1 (available on-
line).
To address the risk of author-bias, one researcher coded the key
topics and a second researcher coded the underlying theory. The re-
searchers performed detailed checks on each other’s coding and ex-
changed comments. Four separate 14 % random samples were in-
dependently verified by a third researcher. Agreement between coders
was verified using inter-rater reliability from Cohen’s kappa (pre-
cedents include Fang & Zou, 2009; Stahl, Maznevski, Voigt, & Jonsen,
2010). The inter-rater reliability coefficient for the topic coding (28 %
of the articles) was 0.93, and for the theory coding (28 % of the articles)
it was 0.85. These values show a high level of agreement between co-
ders and indicate that the coding process produced reliable data. The
theory coding produced slightly lower agreement as there were in-
consistencies in how underlying theory was identified across the dif-
ferent disciplines. The limited disagreements that arose between coders
were discussed and resolved. A summary of the coding results is in-
cluded in Appendix 2 (available online).
3. GVC governance: intersections with O, L and I advantages
Discussion of the literature review findings is structured around an
integrative framework that intersects GVC governance with the OLI
sub-paradigms. As our article departs from prior reviews of GVC and
GPN literature to focus fully on governance and the intersections with
IB, we limit our discussion of the chronological development of these
fields. We encourage readers interested in the disciplinary divisions and
historical development of GVCs, GCCs, GPNs and global factory streams
to refer to the comprehensive reviews of the literature by Bair (2005,
2008, 2009), Coe et al. (2008), Coe (2009, 2012), Hess and Yeung
4
Journal of World Business 55 (2020) 101067
I
Formal institutions Whole chain structure
Informal institutions Polarity
Market structure Embeddedness
Consumption patterns Geographic span
CSOs, NGOs, unions Transmissions mechanisms
Socioeconomic conditions Chain dynamics
Natural environmental conditions Linkage typologies
Employment and labour conditions Quality conventions
Regional and economic development Tolerance of distance
Knowledge spill-over Coordination requirements
Supplier switching costs
Resource dependence theory Organizational economics
Social network theory Transaction cost economics
Institutional theory Internalization
Clusters Industrial organization
(2006), Hernández and Pedersen (2017), and Parrilli, Nadvi, and Yeung
(2013).1
The integrative framework was developed from our analysis of the
articles to help articulate both the structure of the extant literature on
GVC governance and the intersections with IB. Fig. 2 illustrates how we
situate the key GVC governance topics vertically against O, L, and I
advantages; and horizontally against the “antecedents”, “character-
istics” and “outcomes” associated with GVC governance. The central
unit of analysis is the multi-scalar phenomenon of GVC governance
characteristics, with the topics we previously grouped in relation to I
advantages subdivided into macro, meso and micro categories adapted
from (Ponte and Sturgeon, 2014). The framework also distinguishes
antecedents and outcomes that are internal to the GVC (e.g., O ad-
vantages) from those that are external to the GVC (e.g., L advantages).
Our findings move vertically down this framework to draw paral-
lels: firstly, between O advantages and the antecedents and outcomes of
GVC governance, which help explain why firms establish or participate
in GVCs; secondly, between I advantages and GVC governance char-
acteristics, which help explain how firms organize their activities within
GVCs; and thirdly between L advantages and the antecedents and out-
comes of GVC governance, which help explain where firms locate GVC
activities. The articles we associate with a single O, L or I sub-paradigm
in these first three sections constitute three quarters of our sample (n =
107). We identify the key topics and theories related to each sub-
paradigm, teasing out the strengths and weaknesses within each set of
studies. Although we categorize topics into distinct groups of ante-
cedents, characteristics or outcomes, we recognize that scholars find
interdependencies across these groups. The fourth section of our find-
ings therefore works across the OLI levels to discuss the remaining
quarter of articles (n = 36), which engage with dyadic interrelation-
ships between sub-paradigms, indicated by long-dash linking arrows.
These dyadic studies can reflect firms’ embeddedness within networks
(linking O and I advantages); or networks’ embeddedness within loca-
tions (linking I to L advantages); or firms’ embeddedness within loca-
tions (linking O to L advantages). We also use the framework to indicate
the distribution of key theories and the respective historical emphasis of
GPN and GVC branches of literature (see the right-hand side of Fig. 2).
Rather than attempting to be exhaustive, we aim to provide an
overview, limiting our discussion to the most prominent points of
1
Our review acknowledges there is competing terminology and definitions
among these branches, however, for clarity, we refer to GVCs throughout.
S.E. McWilliam, et al.
Fig. 2. Integrative framework.
intersection between the GVC and OLI literature. These intersections
lead us to focus on three high-level trends: (1) strengths in IB for ex-
plaining the antecedents to GVC governance; (2) strengths in GVC lit-
erature for explaining the outcomes of GVC governance; and (3) com-
plementary strengths in both disciplines for explaining the mechanisms
and characteristics through which inter-firm networks are controlled
and organized.
3.1. Firms and GVCs: intersections with O advantages
The articles in this first category (n = 33) are situated in the upper
third of our framework, relating to O advantages. Broadly, these studies
discuss firm-related antecedents and outcomes of GVC governance,
capturing how endogenous attributes of firms can influence or be in-
fluenced by the determination of GVC governance. Through our dis-
cussion of the articles’ theory and content below, we illustrate the in-
tersections with O advantages that can help to explain why firms
establish or participate in GVCs.
3.1.1. Antecedent studies related to O advantages
Among the articles relating to O advantages, studies of antecedents
to GVC governance make up the larger portion (n = 23).2 We generally
found that the IB and other management articles within our sample
offer strong insights into the complexity and dynamics of these ante-
cedents, most notably the actor strategies3 that underpin them. While
GVC theory formally recognizes three main determinants of GVC gov-
ernance, namely the complexity of transactions, supplier capabilities, and
the codifiability of information (Gereffi et al., 2005), our review finds
2
The O, L, I and dyadic categories within which we grouped our articles were
mutually exclusive, therefore combining article counts within these categories
add up to the total number of articles, n=143. However, the sub-categories are
not mutually exclusive and therefore combined counts may exceed those of the
parent category (for O and L, sub-categories are antecedents and outcomes; for
I, the subcategories are macro, meso and micro). For more detail, please refer to
the coding details provided in the appendices.
3 decisions, which typically involve the pursuit of competitive advantage
Italics indicate topic names used in the article coding scheme. Refer to the
appendices for details.
5
Journal of World Business 55 (2020) 101067
that scholars rarely discuss these determinants in isolation. Rather they
are typically integrated into discussions of complex actor strategies. The
depth of analysis and firm-centric perspectives that are needed to ex-
plain such actor strategies are an important contribution from the IB
and other management articles. For example, increases in supplier
capabilities are linked to lead firm specialization strategies, enabling
lead MNEs to outsource selected activities (Buckley, 2009a). Firms
might choose to limit the extent of such outsourcing in response to
transactional complexity (Celo, Nebus, & Wang, 2018). They may also
take advantage of codifiability within digital platforms to facilitate a
dynamic discourse between suppliers and lead firms to improve the
feasibility of outsourcing (Mola, Russo, Giangreco, & Rossignoli, 2017).
Such actor strategies can be considered in relation to three dimensions
of the ownership sub-paradigm.
The actor strategies above may be partially explained by the first
dimension, “transactional O advantages” (Ot), which relate to ad-
vantages firms derive from efficiencies in their transactions. Ot ad-
vantages have a clear overlap with GVC governance theory because of
this transaction cost focus. However, in each of the above examples,
transactional efficiencies do not occur in isolation. Rather, there is a
relationship with how lead firms strategically leverage their resources
and capabilities. Definitions of Ot advantages recognize this relation-
ship as an interdependency between Ot advantages and a second di-
mension of the ownership sub-paradigm, “asset-based O advantages”
(Oa). While Oa advantages are generated from ownership or access to
income-generating assets, including unique resources and capabilities,
Ot advantages arise from a MNE’s ability to coordinate Oa advantages
across national boundaries in ways that create competitive advantage
(Dunning, 2000; Eden & Dai, 2010;). While the three main determi-
nants of GVC governance set out by Gereffi et al. (2005) clearly relate to
Ot advantages, the significance of Oa advantages is less explicit in ex-
tant GVC theory.
The importance of considering this interdependency between Oa
and Ot advantages as antecedents to governance decisions is supported
by findings in the outsourcing and offshoring literature. Scholars have
extensively examined the motives behind offshoring and outsourcing
through coordination of Oa advantages across national boundaries.
S.E. McWilliam, et al.
Such motives include: the search for cost reduction and efficiencies
(Farrell, 2005; Grote & Täube, 2007); resource and entrepreneurial
motivations (Roza, Van den Bosch, & Volberda, 2011); response to
competitors’ actions (Manning, Ricart, Rosatti Rique, & Lewin, 2010;
Roza et al., 2011); and the search for new knowledge and innovation
(Martinez-Noya, Garcia-Canal, & Guillen, 2012). It is important to note
that reviews of outsourcing and offshoring literatures agree that no
single theory explains these phenomena, arguing instead for greater
theoretical pluralism and adoption of co-evolutionary perspectives
(Gilley, Rasheed, & Al-Shammari, 2017; Pisani & Ricart, 2016;
Schmeisser, 2013).
Across our sample, we similarly found that actor strategies related
to Oa advantages and GVC governance were rarely explained by GVC
governance theory alone. Examples include financial strategies (Coe,
Lai, & Wójcik, 2014), innovation capability improvement (Enderwick &
Buckley, 2017) or focusing on core competencies (Mudambi, 2008).
These studies drew on strategic management theories not widely re-
ferenced within the GVC literature such as the resource-based view
(e.g., Enderwick & Buckley, 2017), the knowledge-based view (e.g.,
Mudambi, 2008) and dynamic capabilities (e.g., Eriksson, Nummela, &
Saarenketo, 2014). Although Oa advantages may not be a direct de-
terminant of governance, the above examples suggest they play an
important role within governance decisions. Given the insights avail-
able from outsourcing and offshoring research, it is disappointing that
integration with GVC governance literature remains embryonic.
A limitation of extant outsourcing and offshoring literature is the
tendency towards a narrow discussion of governance in relation to the
firm making the initial decision, with “the offshoring organization as its
main actor” (Schmeisser, 2013, p. 390). Articles in these fields tend to
adopt a direct firm-to-firm or firm-to-subsidiary governance perspec-
tive, rather than to examine outsourcing in the broader governance
context of the GVC. Some notable exceptions include Buckley (2011),
Mudambi and Venzin (2010), Reilly and Sharkey Scott (2014), and
Starosta (2010). Developing the trajectory of these articles towards
greater recognition of the GVC context could help to more explicitly
account for the lead firm agency as a driving force for change in GVC
governance structures.
Given the centrality of transaction costs and Ot advantages within
GVC governance literature, we were surprised to find a limited focus on
codifiability and digitalization. For instance, Leamer and Storper
(2001) argue that reductions in coordination and monitoring costs en-
able the separation of some activities from locational and firm bound-
aries. Despite the importance of this topic, our review found only three
articles focused on strategies related to the codification of information
(Foster, Graham, Mann, Waema, & Friederici, 2018; Machacek & Hess,
2017; Mola et al., 2017).
We now consider the third dimension of the ownership sub-para-
digm, which extends our characterization of lead firms’ active role in
GVC governance. Institutional O advantages (Oi) reflect how firm-
specific norms and values, combined with “an imprint of the institu-
tional environment”, can guide decision-making (Cantwell, Dunning, &
Lundan, 2010, p. 572, Eden & Dai, 2010). Within the literature, Oi
advantages are captured within research into private governance. Private
governance refers to non-governmental standards including corporate
codes of conduct, product certification and process standards that are
voluntarily adopted by GVC firms for reasons including quality control,
risk and reputation management and marketing. Firms’ development of
Oi advantages through private governance can be constrained by the
complexity of determining the extent of lead firm responsibility across
GVCs (Enderwick, 2018). Such complexity arises because corporate
social responsibility (CSR) occupies the nexus between GVC governance
and the institutional environment for global production (Bair &
Palpacuer, 2015). Lead firms’ Oi advantages can therefore vary with
their values and capabilities. Constraints can also arise in relation to the
implementation of private governance across the GVC (Raj-Reichert,
6
Journal of World Business 55 (2020) 101067
2011) and associated limitations to its effectiveness (Mayer & Gereffi,
2010).
3.1.2. Outcome studies related to O advantages
Among the articles relating to O advantages, studies of GVC gov-
ernance outcomes make up the smaller portion (n = 14). We generally
found that GVC literature offered strong insights into these firm-related
outcomes, notably how governance can have significant consequences
for the O advantages of both lead firms and suppliers. Perhaps as a
result of the OLI literature’s past emphasis on the activities of lead firms
above those of the external network, IB and more specifically the out-
sourcing and offshoring literature has developed a narrower focus in its
conception of governance outcomes, emphasizing lead firm resources,
capabilities and performance variables (Pisani & Ricart, 2016;
Schmeisser, 2013). In contrast, GVC literature offers a broader, more
systemic view of governance outcomes. We discuss upgrading, distribu-
tion of value and performance and innovation as three examples of areas
where IB scholars may particularly benefit from attention to the pro-
gress in GVC literature. Other topics in this group include allocation of
risks (Gereffi & Luo, 2015), supplier internationalization (Bacchiocchi,
Florio, & Giunta, 2012) and knowledge transfer (Belso-Martínez, 2015).
There is a strong emphasis across the GVC governance literature on
how power asymmetries within GVCs can inhibit or facilitate supplier
upgrading. Upgrading involves a shift to higher value-added production
activities with improved technology, knowledge and skills and in-
creased profits or benefits (Gereffi, 1994; Humphrey & Schmitz, 2000).
Types of upgrading include product, process, functional and inter-sec-
toral (Humphrey & Schmitz, 2002), commonly explained through the-
ories related to clusters and regional innovation systems as well as GVC
and GPN theory. Suppliers can use technical support from lead firms to
improve their operational, duplicative, adaptive and innovative cap-
abilities (Ivarsson & Alvstam, 2011). These enhanced capabilities have
direct effects on the Oa advantages of suppliers, as well as indirect ef-
fects on the uniqueness of Oa advantages of lead firms. Such indirect
effects can contribute to the progressive fine slicing of activities as
MNEs respond by consolidating core competencies (Mudambi, 2008).
The reverse process, downgrading, is less well-understood but can occur
as part of firms’ strategic rationalization (Mudambi, 1998) and func-
tional repositioning strategies (Blazek, 2016).
The global distribution of value captures how GVC governance can
determine the generation of rents and the distribution of gains (Davis,
Kaplinsky, & Morris, 2018). We suggest that distributions of value may
be an important driver of Oa advantages for GVC actors. Reflecting the
political economy and regional development origins of these studies,
discussion of the distribution of value-added across different functional
stages and geographic locations within the GVC has emphasized eco-
nomic and socio-spatial consequences (Kaplinsky, 2000). However, this
branch of research could be developed as part of efforts to address re-
gional strategy scholars’ past neglect of value creation outside the firm’s
legal boundaries (Mudambi & Puck, 2016). Generalizations about the
distribution of value and labor have identified that high value activities
linked to marketing knowledge tend to occur in advanced market
economies, while low value-added activities linked to production tend
to occur in emerging market economies (Mudambi, 2008). Recent
predictions suggest additive manufacturing technologies may disrupt
these patterns of value distribution (Laplume, Petersen, & Pearce, 2016;
Rehnberg & Ponte, 2018). The literature on labor and value distribution
has remained predominantly qualitative, with quantitative measure-
ment remaining largely elusive due to the complexity of capturing in-
terlinked cross border relations of goods, services, labor and capital.
However, the development of appropriate statistical datasets by some
government statistics offices has become a priority (Nielsen, 2018).
Research efforts have also begun to explore how governance
structures can determine the effectiveness of collaborative relationships
and the levels of performance and innovation that result. As such, they
S.E. McWilliam, et al.
provide insights into the interactions between Ot and Oa advantages.
Enderwick and Buckley (2017) draw on the resource-based view,
transaction costs and internalization theory to explain the benefits that
result from outsourced collaborative ventures within GVCs. These in-
clude the creation of additional value, efficient identification of op-
portunities, safeguarding of technologies and suppression of opportu-
nism. Disaggregated governance structures can also dampen MNE
performance as weaker subsidiary driven innovation results from nar-
rower subsidiary roles and the fine slicing of value chain activities
(Reilly & Sharkey Scott, 2014). The performance of suppliers is also
linked to governance, with more intense involvement between buyers
and local suppliers being associated with higher supplier productivity
(Pietrobelli & Saliola, 2008), and greater supplier resilience to global
financial crises being associated with more relational governance ar-
rangements (Brancati, Brancati, & Maresca, 2017). It is notable that few
GVC governance articles within our sample look quantitatively at how
lead firm performance is shaped by interfirm governance decisions. An
important exception is the study by Lew, Sinkovics, Yamin, and Khan
(2016) capturing how performance and coordination capabilities are
shaped by relational governance, product modularity and cultural dis-
tance. This is an area where GVC literature would benefit from greater
cross-over with offshoring and outsourcing literature. The latter has
already established a strong foundation for examining relationships
between offshore or outsourcing decisions and a range of organizational
performance outcomes. Examples include global market share and in-
novation propensity (Kotabe, 1989, 1990), export sales of final goods
(Bertrand, 2010; Gregorio, Musteen, & Thomas, 2008), and perfor-
mance variability (Mauri & Neiva de Figueiredo, 2012). Studies of such
outcomes are discussed extensively in reviews by Gilley et al. (2017),
Pisani and Ricart (2016) and Schmeisser (2013).
3.2. Explaining the network: intersections with I advantages
The articles in our second and largest category (n = 50) are situated
in the central third of our framework, relating to I advantages. These
studies discuss the characteristics of GVC governance. Through our
discussion of the articles’ theory and content below, we illustrate the
intersections with I advantages that can help to explain how firms or-
ganize their activities within GVCs. We structure our analysis around
intersections at the macro-, meso-, and micro-levels.
GVC governance characteristics can be understood at a macro level
in some chains, usually where there is an over-arching power structure,
such as the hierarchical governance of one lead firm. Other more
complex network GVC structures call for interrogation of governance at
a micro level, examining the control of exchange and coordination
between firms at specific nodes in the chain. The meso level links micro
with macro through the dynamics of exchange extending across mul-
tiple nodes or the whole chain. Our review finds that the distribution of
studies across these levels is not balanced. Macro- and micro-levels
dominate, with 26 and 29 studies respectively. We identified just 5
studies focused on the meso-level.4 We also found each level was
dominated by a single topic. This skewed distribution is reflected in our
discussion below, which emphasizes articles with a primary focus on
the macro-level whole chain structure, the micro level linkage typologies
and the meso-level chain dynamics.
Among the studies related to I advantages, a significant finding is
that there are strong parallels between the development of GVC and IB
literatures, which both recognize a shift from MNE ownership to or-
chestration of foreign assets. However, while IB has explained moti-
vations behind externalization and outsourcing, the GVC governance
literature is clearer in its structured interrogation of the mechanisms
through which such orchestration occurs. This finding is illustrated
4
As previously noted, these sub-categories are not mutually exclusive
therefore they do not add up to 50. Refer to the appendices for more detail.
7
Journal of World Business 55 (2020) 101067
through the progression of GVC governance literature from macro- to
micro-levels of analysis, discussed below. Within the later meso-level
studies, GVC literature develops its representation of these external
control mechanisms further, with analysis of their dynamics and evo-
lution.
3.2.1. Macro level
Over three quarters of the macro-level studies (n = 20) focus on the
whole chain structure to provide a holistic perspective on governance of
the value chain or production network. Typically, studies of the whole
chain structure refer to power asymmetries that encompass the full
GVC, rather than specific inter-firm nodes. This view of governance is
more prevalent in earlier literature encompassing analysis of inter-or-
ganizational networks and drawing on transaction cost economics
(Miles & Snow, 1986; Powell, 1990; Thorelli, 1986). Studies also de-
veloped from industrial organization theories distinguishing between a
buyer- or producer-driven governance dichotomy (Gereffi, 1996, 1999;
Humphrey & Schmitz, 2001). At the time, this dichotomy reflected the
relatively new international division of labor in which lead firms in
buyer-driven chains supplemented their resource-seeking and market-
seeking FDI motivations with a global search for cheap labor (Gereffi,
2001a). Similar to early OLI literature, this dichotomy helped to explain
why and how MNEs relocated the most labor-intensive stages of pro-
duction to global locations with the most abundant and productive low-
cost labor (Wagner, 2019). Although the important distinction between
buyer- and producer-driven chains continues to persist within some
recent articles (such as Azmeh & Nadvi, 2014; Mahutga, 2014; Patel-
Campillo, 2011), GVC literature has increasingly acknowledged the
limitations of this binary view of chain governance due to the com-
plexity inherent to network forms (Bair, 2005, 2008; Coe, 2012; Ponte
& Sturgeon, 2014). We discuss how scholars respond to this complexity
in the next section, titled “micro-level”.
Later developments in the macro-level GVC literature have identi-
fied other topics including geographic span (Laplume et al., 2016), net-
work embeddedness (Parker, Cox, & Thompson, 2018) and polarity
(Ponte, 2014). Of these, the latter presents an important point of dif-
ference with IB literature. GVC polarity refers to the number of func-
tional positions driving the value chain (Ponte & Sturgeon, 2014; Ponte,
2014) and to the dynamics that occur as these positions shift over time
(Sako & Zylberberg, 2017). The literature suggests that polarity is im-
portant for understanding the source(s) of power within a GVC, yet
research into this topic is embryonic. IB literature, including the global
factory work by Buckley (2009b) and studies using the OLI paradigm,
remains predominantly focused on unipolar value chains, where lead
firms with a specific function in the chain play a dominant role in
leading chain governance (for a notable exception, see Azmeh & Nadvi,
2014). This notion of polarity suggests there may be value in subtly
reframing I advantages to more explicitly relate to each firm in the
GVC, rather than a narrower emphasis on the actions of the lead or focal
firm. Such “I(i) advantages” would denote the internalization ad-
vantages for each GVC firm (i).
3.2.2. Micro-level
GVC scholars responded to the limitations of their early theorizing
around the whole chain structure by adjusting their perspective and fo-
cusing instead on the micro-level, most notably through linkages and
power asymmetries between firms. This fundamental topic emphasizes
how governance of linkages between firms at functional nodes within
the GVC can vary, giving rise to different power asymmetries between
firms (Gereffi et al., 2005; Ponte & Sturgeon, 2014). Linkages between
firms reflect internalization decisions between ownership and out-
sourcing and the associated impacts these have for control of the GVC
(Antràs & Chor, 2013; Buckley & Strange, 2015). As such, transaction
costs and internalization are more prominent as underlying theories
among these studies. Importantly for IB, linkages also capture a
nuanced view of the power asymmetries and characteristics within
S.E. McWilliam, et al.
external relationships (Dallas, 2015; Kano, 2017). The five stylized
linkage types range from fully internalized “hierarchy” structures
through to highly externalized “market” arrangements (Gereffi et al.,
2005; Ponte & Sturgeon, 2014). In between these two extremes, there
are three hybrid forms of governance. “Captive governance” is closest
to a hierarchy and locks in low-competence suppliers through trans-
actional dependence (e.g. Haakonsson & Kirkegaard, 2016; Yeung &
Coe, 2015). “Relational governance” fosters more mutual dependence
between lead firms and suppliers as information cannot be codified and
relationships rely on trust and reputation (e.g. Kano, 2017; Lew et al.,
2016). “Modular governance” is closest to a market, where complex
information can be codified, enabling competent suppliers to manage
modules of the chain with greater autonomy (e.g. Starosta, 2010;
Sturgeon, 2002).
At the same time as Gereffi et al. (2005) were developing this fra-
mework, Scott-Kennel and Enderwick (2004) were building upon
Dunning (1995) to call for the I sub-paradigm to conceptually include
non-equity inter-firm co-operations. Such external network relation-
ships were conceived “on a continuum between arm’s-length markets
and complete hierarchies” where the extent of “quasi internalization”
could be measured in relation to the O advantages that were transferred
between alliance partners (Dunning, 1995, p. 465). These articles
highlight that it is not new to view the MNE in terms of the control and
orchestration of networks, rather than the ownership of income-gen-
erating foreign assets. However, as this view of MNEs as orchestrators
has now “become central to the conceptualization of IB”, scholars need
to overcome the challenges associated with a departure from the tra-
ditional legal definition of the corporation (Cantwell, 2015, p. 11). In
addition to the theoretical typologies for linkages in GVCs, the GVC
governance literature offers a wealth of empirical studies that could
support this endeavor.
The empirical enquiries within our sample of articles encompass a
broad scope. Some scholars have verified the characteristics of the five
forms of governance across various industries and locations (e.g.
Schmitt & Van Biesebroeck, 2017; Sturgeon, Memedovic, Biesebroeck,
& Gereffi, 2009; Tejada, Santos, & Guzmán, 2011). Qualitative em-
pirical studies most commonly analyze these linkage types within GVCs
by focusing on a single industry or country (Lee, 2017, e.g. Rutherford
& Holmes, 2008; Starosta, 2010; Sturgeon, Biesebroeck, & Gereffi,
2008). Multiple industry (Gereffi et al., 2005) and multiple country
(Keane, 2012) comparisons are rarer. Quantitative studies have typi-
cally undertaken broader analysis encompassing multiple industries or
locations by using international trade statistics including customs,
census and world trade data (Antràs & Chor, 2013; Dallas, 2014b, 2015;
Mahutga, 2012). With regard to methodologies, despite 13 of the macro
level studies having an empirical component (with the remainder being
conceptual or review papers), only one was quantitative (Mahutga,
2012). This proportion of quantitative methods increases among micro-
level studies, where 6 out of 19 articles with an empirical component
used quantitative methods. Overcoming the data challenges of quanti-
tative GVC research has been recognized as a research priority, a topic
that is discussed in detail by Nielsen (2018).
3.2.3. Meso-level
Our final group of studies in this section examines how macro and
micro levels of GVC governance may be linked through the character-
istics of exchange extending across multiple nodes of the GVC. (Ponte
and Sturgeon, 2014) propose that meso level governance characteristics
should encompass the transmission mechanisms through which firms
control coordination with other firms upstream or downstream in the
GVC. Such mechanisms include contracts and technical standards but
also trust, repetition, social norms, reputation, and osmotic processes
(Ponte & Sturgeon, 2014; Ponte, 2009). In this respect, transmission
mechanisms may help to explain how governance structures determine
the mobility of Oi advantages between firms, which has been previously
associated with quasi-internalization (Dunning, 1995; Scott-Kennel &
8
Journal of World Business 55 (2020) 101067
Enderwick, 2004). Although Ponte and Sturgeon’s work focuses on the
transmission of quality conventions, their construct is open to a broader
interpretation. For example, it could contribute to understanding of the
mechanisms through which knowledge and innovation (related to Oa
advantages) are transferred between orchestrating firms and other GVC
actors, a topic previously highlighted as ‘relatively unexplored’ (Cano-
Kollmann, Cantwell, Hannigan, Mudambi, & Song, 2016; Kano, 2017).
Our review of meso-level topics also included chain dynamics, cap-
turing how GVC governance linkages change over time. Such evolu-
tionary dynamics can cause gradual recalibration of power structures
and polarity, as illustrated through governments’ changing role in
driving biofuel value chains (Ponte, 2014). Actor strategies and reg-
ulation can be central drivers for these evolutionary chain dynamics
(Patel-Campillo, 2011; Ponte, 2014). It can also be a significant chal-
lenge for lead firms to anticipate how location-specific forces induce
changes in GVC governance (Katz & Pietrobelli, 2018) and to manage
the evolutionary processes of strategic coupling, decoupling and re-
coupling between firms and regions (MacKinnon, 2012; Yang, 2014;
Yeung, 2009, 2014). These studies draw on a range of theories typically
including transaction cost economics and institutional theory to explain
how the external control mechanisms within GVCs can evolve in re-
sponse to underlying drivers. As such, their focus on external control
dynamics can offer insights into gaps in internalization theory that have
not been fully addressed through notions of the global factory or quasi-
internalization.
A notable gap within this meso-level is again the lack of integration
with offshoring and outsourcing literature, which offers some important
longitudinal studies of how governance structures can change over time
(e.g. Manning, Lewin, & Schuerch, 2011). An important example by
Vivek, Richey, and Dalela (2009, p. 16) discusses how governance in
offshoring relationships that begins with “calculative trust and oppor-
tunism” can become less transaction cost focused to later emphasize
“resource-based competency building and non-economic trust”. Al-
though such articles do not refer to the broader GVC governance con-
text (and therefore sit outside our sample), their contributions should
not be overlooked.
3.3. Locations and GVCs: intersections with L advantages
The articles in our third and smallest category (n = 24) are situated
in the lower third of our framework, relating to L advantages. Broadly,
these studies discuss location-related antecedents and outcomes of GVC
governance, capturing how attributes of the external environment can
influence or be influenced by governance decisions. Through our dis-
cussion of their theory and content below, we illustrate the intersec-
tions with L advantages that can help to explain where firms locate GVC
activities.
3.3.1. Antecedent studies related to L advantages
Among the studies relating to L advantages, half focus on ante-
cedents to GVC governance (n = 12). We found that while some lo-
cation-related antecedents to GVC governance were explored in depth,
others were lacking. Formal institutions were a dominant topic, with
nine articles. Formal institutions include the written constitutions, laws,
policies, rights and regulations enforced within the market by official
authorities (Carey, 2000; North, 1990). As such, they contribute to the
institution-related L advantages (Li), noting that these capture informal
as well as formal host location institutions (Wagner, 2019). The com-
plexity of formal institutions such as state governance of GVCs should
not be underestimated, particularly in light of increasing delegation to
private actors (Alford & Phillips, 2018; Mayer & Phillips, 2017), often
through hybrid public-private mechanisms (Bair, 2017). Such me-
chanisms are developed through contested institution building (Quark,
2011) and the stewardship of stakeholder trust (Parella, 2016) to
combine corporate and state governance (Harnesk, Brogaard, & Peck,
2017). The resultant “synergistic” forms of private, public and social
S.E. McWilliam, et al.
governance are a means to respond to the limitations of both private
and public governance (Lee & Gereffi, 2015; Mayer, 2014). For the
participating firms, such synergistic governance results in close re-
lationships between Li and Oi advantages as firms internalize reg-
ulatory responsibilities.
The role of the state can also extend from that of facilitator and
regulator, to that of a producer or buyer (Horner, 2017). Where the
state becomes a driving actor that operates alongside other lead firms
within a multipolar governance structure (Ponte, 2014), the state’s role
can be better understood in relation to the power relationships we have
associated with I advantages, rather than to Li advantages. Develop-
ments such as the United Kingdom's planned exit from the European
Union and protectionist-oriented national initiatives under the Trump
administration in the United States suggest the increasing relevance of
state roles beyond facilitating GVCs and GPNs (Horner, 2017).
Other location-related antecedents to GVC governance can con-
tribute to Li advantages, such as market structure and consumption pat-
terns (Altenburg, 2006). A key example is in the recent emergence of
more polycentric trade patterns where southern hemisphere actors and
southern hemisphere end markets have more prominent roles (Horner
& Nadvi, 2018), which may be an important driver of growth in value
chains that are regionally-concentrated rather than global (Lund et al.,
2019). Other contributors to Li advantages arise as a secondary focus
within articles, including informal institutions (Clarke & Boersma, 2015;
Havice & Campling, 2017; Katz & Pietrobelli, 2018; Knoll & Jastram,
2019); and non-government and civil society organizations (NGOs and
CSOs) (Levy, 2008; Mayer & Gereffi, 2010; Tran, Bailey, Wilson, &
Phillips, 2013).
While formal institutions are clearly a fundamental antecedent to
GVC governance, our review indicates that the bias towards this topic
may be to the detriment of other important locational drivers. Most
notably, our sample had only four studies with a primary focus on lo-
cation resources, with which we associate asset and resource-related L
advantages (La). La advantages can include access to natural and
human resources or critical (knowledge-intensive) assets (Wagner,
2019). Mudambi and Venzin (2010, p. 1511) illustrate the strong
connection to governance as firms pursue competitive advantage by
combining their own resources and competencies with the “compara-
tive advantages of geographic locations”. It is the interplay between
these competitive and comparative advantages that determines both
the location strategy (offshoring) and the control strategy (out-
sourcing).
We found articles discussing the relationship between GVC gov-
ernance and the comparative advantage of geographic locations in re-
lation to low cost labor (Crestanello & Tattara, 2011) and also in re-
lation to refined FDI motives that prioritize infrastructure, skilled labor,
and political, social and economic stability (Giroud & Mirza, 2015).
With new technologies such as additive manufacturing and the asso-
ciated localization of production, location choice criteria emphasize
intellectual property status, industrial standards and logistical com-
plexity (Hannibal & Knight, 2018). Although these four articles capture
some of the interdependencies between GVC governance and La ad-
vantages, we suggest that the emphasis given to this topic may not be
proportionate to its importance. This shortfall may be influenced by
GVC governance theory which has not explicitly identified the re-
sources and assets of locations among determinants of governance
structures. Rather, location resources and assets are implicitly included
as underlying factors to transaction costs and the capabilities of sup-
pliers. We therefore question whether the comparative advantage of
locations is adequately researched as a driver of GVC governance de-
cisions.
This position is supported by the prominence of location as one of
the “most examined topics” in the offshoring literature (Pisani & Ricart,
2016). The interrelatedness of the location and governance mode de-
cision is illustrated by Hätönen (2009) through the investigation of
factors affecting the sequence of partner choice and location choice.
9
Journal of World Business 55 (2020) 101067
Mudambi and Venzin (2010) argue that this decision sequence varies
with the extent to which a firm’s strategic objectives are location
bound. They suggest that location and governance decisions should be
continuously evaluated and adapted in response to firm- and country-
level competitive dynamics. Given this interrelatedness of governance
and location choice and the sparsity of GVC governance articles fo-
cusing on location resources, this appears to be an important gap in the
literature. More explicit analysis of the interplay between GVC gov-
ernance and location choice is therefore another area where IB offers
strengths that could augment GVC theory by more explicitly accounting
for lead firm agency in GVC governance decisions (Asmussen, Nielsen,
Weatherall, & Lyngemark, 2019).
3.3.2. Outcome studies related to L advantages
Among the studies relating to L advantages, half focus on GVC
governance outcomes (n = 12). Generally, we found that GVC litera-
ture offered insights into some location-related outcomes that are less
prominent within IB. Most notably, articles illustrate how governance
can have significant consequences for regional and economic develop-
ment, and for employment and labor conditions. While the effects are not
immediate, over time these factors can gradually change the La and Li
advantages for lead firms and suppliers, contributing to important co-
evolutionary processes.
The articles discussing regional and economic development were
commonly interdisciplinary, drawing on a range of theories including
institutional theory, clusters, and social network theory. Collectively,
these studies reinforce the now widely accepted argument that regional
development needs to be understood in the context of the changing
dynamics of GPNs and GVCs (Gereffi, Humphrey, Kaplinsky, &
Sturgeon, 2001; Yeung, 2009). Longitudinal perspectives are promi-
nent, for example with Buckley (2009b, p. 131) explaining how GVC
governance dynamics can constrain the paths to economic development
as emerging country firms pursue the “formidably difficult” im-
plementation of strategies for upgrading or to establish new global
factories. Longitudinal perspectives extend into dynamics from complex
strategic coupling, decoupling and recoupling between firms and re-
gional economies (Coe, Hess, Yeung, Dicken, & Henderson, 2004;
Yeung & Coe, 2015). Such coupling may be understood as an outcome
associated with dynamics in Li and La advantages to firms that arise
with regional development. For example, Yang and Coe (2009) explore
how regional development occurs through strategic coupling that in-
tersects local assets with the strategic requirements of GVCs. When
regional assets such as the local human and technological resource base
(related to La advantages) combine with local institutional advantages
(related to Li advantages), a complementary effect arises through which
the advantages of regions interact with the strategic needs of GVC ac-
tors. They find the result of this interaction is that regional development
evolves dynamically with both the rapidly changing strategic needs of
GVCs and with the slower and geographically variable transformations
in regional economies.
Integration of these regional and economic development perspec-
tives into IB is not new, with branches of literature on emerging market
MNEs (Luo & Zhang, 2016), regional strategy (Rugman & Verbeke,
2004; Verbeke & Asmussen, 2016) and global cities (Asmussen, Nielsen,
Goerzen, & Tegtmeier, 2018; Goerzen, Asmussen, & Nielsen, 2013)
literature. However, within such literature, there have been limited
attempts to “holistically incorporate” the workings of GVCs extending
beyond a firm’s ownership boundaries (Mudambi & Puck, 2016, p.
1077).
Other external outcomes that may contribute to the Li and La ad-
vantages of firms relate to changing expectations for corporate social
responsibility. As identified in the CSR literature, powerful lead firms
are increasingly held accountable for the social consequences of activ-
ities across all stages of their value chains. As such, GVC literature that
links governance structures to better employment and labor conditions
merits greater attention from IB scholars. In this context, employment
S.E. McWilliam, et al.
and labor conditions refer to the working conditions and points of
leverage for workers that are determined by GVC governance dynamics.
Local employment is affected by firms’ organizational strategies
(Palpacuer, 2000) as a network of actors intermediate between global
pressures and local changes in workplace relations (Munir, Ayaz, Levy,
& Willmott, 2018). La and Li advantages related to workers and labor
regulation can translate into Oa advantages, as MNE reputation can
hinge on how well such labor standards permeate down the GVC (Nadvi
& Raj-Reichert, 2015). Reputational damage can be either avoided or
amplified by the successes or failures of labor agency in protecting
workers’ rights and employment conditions (Clarke & Boersma, 2015;
Niforou, 2015; Stringer, Hughes, Whittaker, Haworth, & Simmons,
2016). Reputation can be similarly exposed through Li advantages
linked to natural environment conditions. This refers to the human-en-
vironmental interactions within GVCs and the regulatory mechanisms
concerned with the sustainability of the natural environment (Harnesk
et al., 2017; Knoll & Jastram, 2019).
While the GVC literature draws close associations between gov-
ernance structures and these labor, socio-economic or natural en-
vironment conditions, the connections are less explicit in IB. In the past,
IB has focused on entry modes above “foreign operation methods”
(Welch, Benito, & Petersen, 2007, p. 3); the latter of which is more
accommodating of a longitudinal and co-evolutionary perspective. The
past emphasis on entry modes may be in part responsible for greater
emphasis on La and Li as antecedents to location choice and governance
mode within IB (Nielsen et al., 2017). This is where IB could draw on
GVC literature for its more explicit consideration of how outcomes as-
sociated with GVC governance can drive changes in the institutional
environment, which in turn affect the governance of GVCs. To this end,
Cantwell et al. (2010) find that IB has given limited attention to the co-
evolutionary aspects of how firms interact with locations. A notable
exception to the static conceptual definition of OLI common to much of
the literature (Wagner, 2019) is offered by Singh and Kundu (2002),
who emphasize the continuous development of OLI variables with
changing environmental conditions. Cantwell (2015, p. 13) argues that
while O, L and I factors remain central to IB, the future development of
the field may involve using them as a means for appreciating the MNE’s
“wider network structures” and “relationships with its environment”,
rather than for studying the firm per se. We suggest that the outcome
themes outlined above may be pertinent to this approach.
3.4. Dyadic OLI interactions
The articles in our final category (n = 35) focus on dyadic inter-
relationships and associated co-evolutionary dynamics across the OLI
paradigm. A central feature of the eclectic paradigm is that the in-
dividual sub-paradigms do not suffice to explain FDI. Rather, trade
(export) and non-trade (FDI) routes of internationalization are viewed
as dependent on the reciprocity and interplay between all three of the
OLI conditions (Wagner, 2019). For example, interdependency between
O and L advantages (Dunning, 1980) can arise where one type of O
advantage is related to bygone home or host country-specific L ad-
vantages. Similarly, an MNE’s capability to internalize a particular ac-
tivity is provided by O advantages and their willingness or motivation
to proceed is provided by I advantages (Dunning, 1988). Although
various studies examine interaction effects among all variables (e.g.
Brouthers et al., 1996; Buckley & Hashai, 2009; Pitelis, 2007), con-
sideration of the evolutionary approach has more recently emphasized
the mutually reinforcing interactions between O and L. Most notably,
Cantwell et al. (2010), Cantwell (2015) and Cano-Kollmann et al.
(2016) illustrate how MNEs can co-evolve with the institutional en-
vironment as the institutional ownership advantages of firms can be
transferred (intentionally or unintentionally) alongside other owner-
ship advantages to host countries, and may influence their institutional
development. While such co-evolution between firms and locations
(through O and L advantages) is clearly recognized in IB, there has been
10
Journal of World Business 55 (2020) 101067
less attention to co-evolution between firms and networks (through O
and I advantages). This is where GVC literature offers a strong con-
tribution, as interactions between topics related to O and I advantages
constitute the largest group of dyadic studies (n = 22) in our sample.
Through our discussion of these articles below, we seek to extend the
evolutionary approach to support a more explicit integration of co-
evolution between firms and networks.
To illustrate the reciprocity among the OLI dyads with this per-
spective, we first highlight the “evolutionary interpretation” of deci-
sions between governance types provided by Schmitt and Van
Biesebroeck (2017, p. 18). Initially, development in technologies and
production practices (and the associated resource and asset-based L
advantages) enable MNEs to outsource selected activities, typically
through captive or relational governance structures (providing MNEs
and suppliers with I advantages). As suppliers gain experience, their
capabilities (and asset-based O advantages) improve, enabling them to
develop technologies that codify more aspects of the transaction (im-
proving suppliers’ transaction-based O advantages). These shifts allow
governance to evolve from hierarchical forms, through captive forms
and towards the more “superior” modular forms (each form offering
associated I advantages that firms convert to O advantages). This ex-
ample is not intended to apply across all GVCs or industries; rather it
illustrates how GVC structures and power asymmetries can co-evolve
with the O advantages of firms.
3.4.1. Embedding firms into networks through OI dyads
The articles in the OI dyadic category discuss interactions between
O and I advantages to reflect the boundary-spanning activities that
embed firms into networks (Schotter, Mudambi, Doz, & Gaur, 2017).
We organize these dyads into two groups. First, where antecedent O
advantages influence the characteristics of GVC governance (“O-I”);
and second, where governance characteristics influence outcome O
advantages (“I-O”).
The “O-I” dyadic studies focus almost entirely on actor strategies
(related to O advantages) and associated GVC governance character-
istics (related to I advantages). Such actor strategies include speciali-
zation (e.g. Antràs & Chor, 2013; Buckley, 2011) and financial gov-
ernance (Seabrooke & Wigan, 2017). Yeung and Coe (2015) propose a
framework for four distinct firm-specific strategies that each result in
differing organizational outcomes for the network. The integration of
digital technologies is also recognized as important for enabling the
choice of governance through platforms that allow dynamic discourse
with outsourced suppliers (Mola et al., 2017). This first group of studies
draws on the strengths in IB for explaining firm motivations and asso-
ciated antecedents to GVC governance.
The “I-O” dyadic studies link interfirm governance structures (re-
lated to I advantages) with the outcomes for suppliers and lead firms
(related to O advantages). These studies capture the upgrading ad-
vantages and disadvantages associated with the different governance
types (Humphrey & Schmitz, 2000; Lee, 2017); the contractual barriers
to entry that distort access to upgrading opportunities (Dallas, 2014b);
and why differences arise in upgrading strategies (Parker & Cox, 2013;
Tejada et al., 2011). Among the various governance types, modular
governance is singled out because it is associated with de-linking in-
novation and manufacturing to go beyond upgrading and drive the rise
in highly concentrated global contractors (Starosta, 2010). Another
outcome of governance structures commonly studied with a dyadic
focus is performance and innovation (related to asset-based O ad-
vantages). Sturgeon (2002) has argued that modular governance in
particular yields better economic performance in a global context than
more spatially and socially embedded networks. In some contrast,
Pietrobelli and Saliola (2008) find that higher supplier productivity is
achieved when there is more intense involvement between buyers and
suppliers. A more cautionary voice is offered by Celo et al. (2018),
warning that MNE performance can be disrupted by the management
challenges and complexity associated with extensive outsourcing and
S.E. McWilliam, et al.
offshoring. This second group of studies indicates potential insights for
IB gained from integrating outcomes of GVC governance into a co-
evolutionary approach.
The remaining IL and OL dyads were less common (n = 6 and n = 7
respectively) and are briefly summarized.
3.4.2. Embedding networks into locations through IL dyads
Articles linking “I” and “L” reflect the boundary-spanning activities
that embed networks into locations. These studies examine dyads where
antecedent L advantages influence the characteristics of GVC govern-
ance; or where governance characteristics influence outcome L ad-
vantages. In the first of these categories, studies examine relationships
between formal institutions (which relate to Li advantages) and GVC
governance (which relates to I advantages). For example, Linqing,
Liwen, and Haiyan (2011) discuss how different governance structures
reflect the roles of states and enterprises. Nadvi (2008) focuses on the
effects of international standards, and particularly how non-compliance
with these can have consequences for linkages within GVCs. In the
second category, such GVC linkages and chain dynamics (related to I
advantages) are shown to influence regional and economic develop-
ment outcomes. These studies build on notions of territorial and societal
embeddedness (Coe, 2012) to illustrate the inter-dependence between
networks and locations as an evolutionary process of strategic coupling,
decoupling and recoupling between firms and regions (Yang, 2014;
Yeung, 2009, 2014).
3.4.3. Embedding firms into locations through OL dyads
We anticipated finding articles linking “O” and “L” that bridge the
diagonal cross-flows within our integrative framework to capture how
GVC governance can mediate firms’ embeddedness in locations.
However, only one study followed this format, spanning from O-related
governance antecedents to L-related outcomes and examining how lead
firms in complex GVC structures use private governance to manage
institutional requirements for sustainability with associated repercus-
sions for natural environmental conditions (Knoll & Jastram, 2019).
Most studies in this group examine relationships between L-related
antecedents and O-related antecedents, primarily formal institutions
(related to Li) and private governance such as CSR (related to Oi) (Bair,
2017; Mayer & Phillips, 2017; Ouma, 2010; Parella, 2016; Quark,
2011). One other dyadic study discusses the relationship between O-
related outcomes and L-related outcomes, finding that the distribution
of value among GVC actors (related to Oa advantages) can determine
the resultant socio-economic conditions (related to La advantages),
particularly distortions in income distributions (Kaplinsky, 2000).
4. Discussion and future research
Our findings suggest three high-level trends in relation to the GVC
governance literature. First, the “inside-out” or firm-to-network per-
spective in IB offers strengths in explaining the antecedents of GVC
governance related to the orchestrating role of lead firms. Second, the
“outside-in” or network-to-firm perspective in GVC theory has resulted
in strengths in explaining the outcomes of GVC governance that illus-
trate the network-dependency of lead firms. Third, both disciplines
show complementary strengths for explaining the mechanisms and
characteristics through which inter-firm networks are controlled and
organized. Future research directions for IB and GVC scholars should
build on these respective disciplinary strengths to bridge the gaps
identified below. Our suggestions for future research align with the
cyclical and multilevel nature of our integrative framework to empha-
size dynamics across boundaries between firms, networks, and loca-
tions. As such, they indicate that complex co-evolutionary processes
merit a more central focus within the literature. We therefore begin
with the importance of co-evolution as an umbrella construct for future
GVC governance research. Our subsequent discussion of specific gaps
and future research questions is structured in relation to (1) the GVC-
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Journal of World Business 55 (2020) 101067
embedded lead firm as orchestrator, (2) the GVC-embedded lead firm as
network-dependent, and (3) integrated theories of network control.
4.1. Co-evolution in GVC governance
We define co-evolution in GVC governance as the concomitant de-
velopment of firms, networks and locations over time. From a firm
perspective, co-evolution in GVC governance entails the inter-
dependencies between actors within diverse local contexts, resulting in
firms’ “multiple embeddedness” in networks and locations (Meyer,
Mudambi, & Narula, 2011, p. 236). The related concept of “dual em-
beddedness” (Schotter et al., 2017, p. 403) emphasizes that MNEs and
their subsidiaries are internally embedded in an intra-organizational
MNE network and externally embedded in their respective locations
where complex inter-organizational interactions and trade-offs occur.
Dual-embedded lead MNEs are required to undertake a difficult global-
local balancing act (Bartlett & Ghoshal, 1989). On the one hand, they
must overcome inter-organizational managerial difficulties as they in-
teract with GVC actors in different local contexts. On the other hand,
they must also implement the effective and efficient intra-organiza-
tional global management of a network of subsidiaries (for example,
Lee, Chung, & Beamish, 2019). These dynamics imply that strategic
changes in lead firms’ GVCs affect local actors and locations (Coff,
1999; Mudambi & Navarra, 2004). Locations are affected as they are
altered and exploited by firms through spillovers and learning.
The capacity to understand these co-evolutionary dynamics is an
important foundational component for explaining changing trends in
GVCs that ultimately drive structural shifts in global trade. Research
streams related to co-evolution in GVC governance may therefore en-
able IB and GVC scholars to contribute to explanations of macro-level
trade trends recognized by Gereffi (2018) and Lund et al. (2019) that
are increasingly central issues for policymakers. Three examples of key
structural shifts include: the changing geography of trade as southern
actors and southern end markets develop increasingly prominent roles
(Horner & Nadvi, 2018); the increasing centrality of services within
global trade and the “servicification” of manufacturing (Miroudot &
Cadestin, 2017, p. 5); and the resetting of global skills requirements
through technologies underlying trade activities (e.g. Hannibal &
Knight, 2018; Laplume et al., 2016; Strange & Zucchella, 2017).
Endeavors to develop an understanding of co-evolution in GVC
governance rely on the theoretical foundations of dual-embeddedness,
within which firms, networks, and locations are bound together and
change over time as an industry evolves (Gereffi & Lee, 2012). Various
GVC constructs identified in our integrative framework such as in-
stitutions and innovation (Fig. 2) drive this momentum of co-evolution.
However, although we found that a quarter of our articles captured
dyadic interactions across the OLI paradigm, we found none that were
fully triadic. We therefore suggest triadic studies as a challenging but
important priority for future research. The content of such studies could
be developed in response to the disciplinary strengths and weaknesses
we discuss below.
4.2. The GVC-embedded lead firm as orchestrator
The introduction to this article suggested that the deliberately
narrow focus on inter-firm relationships within GVC governance lit-
erature may have resulted in an emphasis on the “I” sub-paradigm
somewhat to the detriment of “O” and “L”. While this supposition was
not misplaced, our review has revealed more nuanced research gaps.
Rather than broadly neglecting research related to the O and L sub-
paradigms per se, we found that the GVC governance literature has
under-emphasized just certain O- and L-related antecedents of GVC
governance. The most notably under-developed areas relate to actor
strategies and location resources. Our discussion of findings in relation
to both of these topics shows how the strategies underlying GVC gov-
ernance decisions can proactively create opportunities for the MNE: to
S.E. McWilliam, et al.
accrue Oa advantages such as innovation capabilities (Enderwick &
Buckley, 2017); or to pursue La advantages such as knowledge-in-
tensive assets (Mudambi, 2008). These examples illustrate how lead
firm decisions and the strategic objectives that motivate them can in-
fluence the GVC governance characteristics that result. However, the
orchestrating role of lead firms is not explicitly included in GVC theory.
Rather it is subsumed into the set of three determinants that are vari-
ables of the GVC: the complexity of transactions, the capabilities of
suppliers, and the codifiability of information (Gereffi et al., 2005).
What these GVC variables exclude is influence from the dual-embedd-
edness of lead firms and the bounded rationality of managers’ decisions.
By isolating the “agency” of lead firms, we highlight that GVC
governance is not determined independently of GVC actors. Rather,
decisions are filtered in relation to the values, objectives and other
management dynamics that originate from within a lead MNE’s intra-
organizational global network and may therefore prioritize a particular
type of Oa advantage. Managers involved in governance decisions may
also not always be equipped to identify or implement the most optimal
response to the three governance determinants. Neither of these lim-
itations is explicit from the industrial organization perspective of extant
GVC theory. Future studies should therefore interrogate the agency of
lead firms through research questions that capture how such MNE dual-
embeddedness and bounded rationality can mediate GVC governance
decisions. Research questions could explore this mediating role by
distinguishing how MNE governance decisions respond to intra-orga-
nizational strategy as well as to the three GVC variables. As our review
found only limited reference to theories related to firms’ strategic re-
sources (Wernerfelt, 1984), competencies (Heene & Sanchez, 1997),
knowledge (Grant, 1996), and dynamic capabilities (Teece, Pisano, &
Shuen, 1997), such future research may be advanced by more explicit
integration with these strategic management perspectives. Related fu-
ture research should also build on IB strengths in explaining the re-
lationship between location choice and entry modes. This literature
could be harnessed to explore how location characteristics and the as-
sociated La advantages can also influence GVC governance decisions.
4.3. The GVC-embedded lead firm as network-dependent
In contrast to the under-emphasis of some antecedents, we found
that GVC governance research relating to the outcome components of
the O and L sub-paradigms was remarkably strong. This group of arti-
cles interrogated the multifaceted repercussions of GVC governance
structures and associated interdependencies, which are currently less
integrated into IB research. Repercussions include how upgrading and
associated value redistributions (Sako & Zylberberg, 2017) may reset
the O advantages of both suppliers and lead firms. As O advantages
change with upgrading, so too do the power asymmetries (associated
with I advantages), resulting in more mutual interdependency between
lead firms and suppliers (Starosta, 2010). Other repercussions include
how GVC governance structures can influence risk distributions (Gereffi
& Luo, 2015; Keane, 2012), performance (Celo et al., 2018; Pietrobelli
& Saliola, 2008; Sturgeon, 2002), and innovation (Enderwick &
Buckley, 2017; Khan, Rao-Nicholson, & Tarba, 2018; Reilly & Sharkey
Scott, 2014). Alcácer, Cantwell, and Piscitello (2016, p. 506) have al-
ready highlighted the need for IB scholars to rethink how network
governance changes the nature of the O advantages that multinationals
enjoy, as knowledge, innovation, and competitive advantage no longer
reside solely in any one part of a business ecosystem, but rather “in its
structure and its various linkages”. Our findings support this view, in-
dicating that performance and innovation outcomes within GVCs are
dependent on the capabilities not just of the lead firm but on those of
the whole network. The governance of the inter-firm boundaries across
which those capabilities are deployed is therefore crucial. This aligns
with an expanded definition of O advantages, encompassing not only
the capabilities that firms hold directly, but also the “disintegration
advantages” that they can access externally (Alcácer et al., 2016; Kedia
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Journal of World Business 55 (2020) 101067
& Mukherjee, 2009). Yet the limited number of studies, particularly of
quantitative financial performance across GVCs, suggests such analyses
remain constrained by data limitations.
We therefore support the call from Nielsen (2018) for continued
efforts from both scholars and statistical bureaus to solve the “puzzle”
of measuring GVCs. This measurement could support an extended un-
derstanding of value creation beyond firm boundaries (Mudambi &
Puck, 2016) and contribute to a more nuanced understanding of how
performance and innovation outcomes can evolve alongside inter-firm
governance arrangements. Increased availability of finer grained and
relevant data on GVCs would enable more and stronger quantitative
research. There remains an unfortunate lack of quantitative papers on
GVCs across all of the literature. Notable exceptions include analysis of
the whole chain structure by Mahutga (2012), which uses an indirect
measure of GVCs, i.e., global offshoring behavior. There are more
quantitative studies that focus on linkages within GVCs, such as Antràs
and Chor (2013), Ashenbaum (2018) and Lew et al. (2016).
At the moment, the only systematic body of quantitative work on
GVCs has been undertaken by scholars at the University of Groningen
using the World Input-Output Database (WIOD) (e.g. Feenstra, Inklaar,
& Timmer, 2015; Timmer, Erumban, Los, Stehrer, & de Vries, 2014).
The approach pioneered by these scholars offers great promise for IB
researchers. Other key reports are produced by the OECD (Andrenelli,
Lejárraga, Miroudot, & Montinari, 2019; Backer & Miroudot, 2013),
UNCTAD (UNCTAD, 2013, 2015), UNIDO (Sturgeon, 2008), and the
WTO (WTO, 2018; World Bank & World Trade Organization, 2019).
Related research questions should contribute to developing the methods
for analyzing performance across complex GVC structures. Questions
should consider performance dependency between lead firms, suppliers
and other GVC actors, including effects from states and institutions that
may facilitate strategic coupling (Gao, Dunford, Norcliffe, & Liu, 2017;
MacKinnon, 2012; Yeung, 2009).
4.4. Integrated theories of network control
Integrating the complementary strengths of the GVC governance
and OLI perspectives has the potential to provide rich explanations for
interfirm relationships and the structure of GVCs. GVC theory offers a
proven typology for how inter-firm networks can be organized, ex-
plaining external control mechanisms with a rich empirical literature
that has begun to validate the theory with real-world data, albeit with
aforementioned limitations to the available quantitative approaches.
Studies of polarity extend the five-fold typology to acknowledge that
there can be multiple driving forces within GVCs, beyond those from a
single lead MNE. Together, these developments in the GVC literature
suggest that there may be value in reframing I advantages to more
explicitly acknowledge lead firm interdependencies with other GVC
actors. IB scholars have already recognized that the association between
ownership and control of activities across borders, which had tradi-
tionally defined I advantages, breaks down within network-orche-
strated GVCs (Alcácer et al., 2016; Kedia & Mukherjee, 2009). Through
our integrative framework, we have sought to extend the reach of the
internalization paradigm to more explicitly encompass GVC governance
theory. We now outline two approaches to integrating these theories in
future research.
Earlier, we suggested one approach to adapting I advantages to
capture network governance structures may be to consider the I ad-
vantages specific to each firm (i) in the GVC. We also agree with Benito
et al. (2019) and Strange and Humphrey (2018) that IB theory can be
more explicitly integrated with the GVC literature’s widely validated
explanations of control within externalized relationships. We therefore
suggest a second approach that progresses from internalization theory’s
emphasis on the ownership boundary of the firm. Rather than con-
ceiving MNE control of production activities in terms of either inter-
nalization or disaggregation advantages, which both reinforce the di-
chotomy between internal and external, future studies should consider
S.E. McWilliam, et al.
reframing such discussions to allow for “network advantages”. In ex-
tending the focus beyond the lead MNE boundary as suggested by
Mudambi and Puck (2016), network advantages emphasize the benefits
MNEs can derive from a variety of external control arrangements, as
well as changing polarity (e.g. Lunnan & McGaughey, 2019).
We suggest that the route to developing both above approaches lies
in interdisciplinary research endeavors. While IB literature does not
offer a competing typology to GVC governance theory, it does offer a
wealth of literature detailing types of inter-firm linkages that could
(and should) be more clearly integrated with explanations of the GVC
governance typologies. IB studies of inter-firm linkages focus on the
strategic opportunities and constraints for firms, bridging across own-
ership, location and internalization advantages. Relevant branches of IB
literature include offshoring (Pisani & Ricart, 2016; Schmeisser, 2013),
outsourcing (Gilley et al., 2017; Quinn & Hilmer, 1994), strategic alli-
ances (Das & Teng, 2000; Gomes, Barnes, & Mahmood, 2016) and
networks (Gulati, 1998). While our review has touched on how some of
our GVC governance articles intersect with this literature, we call for
much greater integration, particularly with offshoring and outsourcing
research. The opportunity for this is illustrated by Schmeisser (2013, p.
402) who finds that contemporary offshoring practices have moved
away from firms offshoring specific activities and towards the “effective
configuration of the organizational system on a global scale”.
There were some examples within our sample where articles did
self-identify as integrating some of the above IB literature branches
with GVC governance research, notably in relation to offshoring and
outsourcing (Mudambi & Venzin, 2010; Starosta, 2010), collaborative
ventures (Enderwick & Buckley, 2017), and alliances (Buciuni & Mola,
2014). However, the limited number of such articles was not com-
mensurate to the potential of the literature. Indeed, Buckley, Doh, and
Benischke (2017, p. 1050) have argued that the work on offshoring and
outsourcing inside the IB domain has evolved “almost independently”
from research on the same phenomena in other disciplines. This isola-
tion is to the detriment of IB and limits its capacity to continue to de-
velop theories of MNE strategy in the context of GVCs. As GVCs have
evolved through outsourcing, power and control have become less
concentrated within the single lead firm. This heightens the importance
of explaining how strategy is determined or coordinated across a net-
work of firms as recognized by Buckley (2011, p. 273): he referred to it
as a “major problem” in the global factory literature. By more explicit
integration of the above branches of IB with GVC literature, future re-
search can explore how strategy is coordinated between GVC co-lead
firms or with powerful suppliers, facilitated by strong inter-firm
boundary-spanning capabilities (Schotter et al., 2017).
There is also a potential for GVC research to draw on IB research
that explores dynamics in inter-organizational linkages. Similar to the
in-depth longitudinal perspective offered by (Vivek et al., 2009), arti-
cles by Lumineau and Mulotte (2019) and Schilke and Jiang (2019)
discuss how and why inter-firm linkages can evolve over time. These
latter examples suggest trends for pre-acquisition alliances that reduce
the likelihood of post-acquisition divestitures. More explicit integration
of how such co-evolutionary dynamics occur between firms and net-
works will aid GVC scholars in redressing criticism that the field relies
on a “static conception of industrial governance” (Yeung & Coe, 2015,
p. 31).
We conclude this section with a final recommendation that com-
plements the approaches to adapting I advantages discussed above to
support more integrated theories of network control. We suggest that
future research should redress digitalization as an increasingly central
component of network control. Technology has been closely linked to
new forms of network governance (Alcácer et al., 2016). Gereffi et al.
(2005) and others have similarly described the importance of “the co-
difiability of information” in determining GVC governance. However,
the wealth of newly emerged digital technologies increases the im-
portance and reach of this construct. In the past, there was one clear
effect from digital technologies: reduced transaction costs. However,
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Journal of World Business 55 (2020) 101067
the next generation of digital technologies will have “more complex,
multidimensional effects” (Lund et al., 2019, p. 1). Recent increases in
digital technology capabilities coupled with declining cost increasingly
fuel “backshoring” where manufacturing is relocated back to home
countries (Dachs, Kinkel, & Jäger, 2019). With digitalization, such
backshoring strategies are strongly associated with both cost reduction
and better control of high product quality across the value chain
(Ancarani, Di Mauro, & Mascali, 2019). Digitalization also enables new
transactional forms through platforms (Stallkamp & Schotter, 2019).
How will such changes in the digital economy affect GVC govern-
ance? Gereffi (2018, p. 444) suggests three possible scenarios: com-
plementarity as traditional and digital MNEs co-exist; displacement of
traditional lead-firms through digital MNE disruption; or hybridization
as existing lead firms adapt to new technologies to improve efficiency
and competitiveness. Research into the behavior of lead firms within
these scenarios, and into the related role of digital control mechanisms
in GVCs, should draw on existing IB research strengths relating to di-
gital MNEs (Nachum & Zaheer, 2002; Van Tulder, Verbeke, & Piscitello,
2018). We suggest such “digital governance” may become increasingly
central to the orchestration of GVCs and may be conceived as a form of
meso level transmission mechanism. Future research questions should
investigate this by asking how the integration of digital technologies
reshapes GVC governance mechanisms and what the implications are
for GVC governance theory.
5. Conclusion
The aim of this review was to enable scholars to think more sys-
tematically about intersections between IB and GVC governance. We
have sought to fulfil this by using the macro-level OLI framework to
organize and analyze existing multidisciplinary theoretical and em-
pirical studies about GPN and GVC governance. Our analysis involved
reviewing the content and underlying theory of the multidisciplinary
literature on GVC governance and developing an integrative framework
structured in relation to OLI and GVC theories. We then synthesized our
findings related to each OLI component and dyadic interrelationship
and discussed associated co-evolutionary dynamics. The disciplinary
strengths and weaknesses we identified were distilled into three areas
that are central to the agenda for a more coherent understanding of
GVC governance in future research: (1) the GVC-embedded lead firm as
orchestrator; (2) the GVC-embedded lead firm as network-dependent;
and (3) integrated theories of network control. Drawing from the
complementary disciplinary strengths of IB and GVC governance lit-
erature in the context of our integrative framework will support more
structured integration between the fields. It will also support the de-
velopment of IB research into the co-evolutionary dynamics between
firms, networks and their socio- and geo-political context. As argued by
Teagarden, Von Glinow, and Mellahi (2018), this type of con-
textualization lies at the heart of future IB research.
We recognize that such co-evolutionary contextualization involves
incredibly complex geopolitical dynamics that are beyond the scope of
this article. However, we question whether IB scholars are adequately
engaging with the strong interdependencies between MNEs, GVCs and
the structural shifts in global trade, with which policymakers are
grappling. We also question whether insights from IB are being made
suitably accessible, for example, to the decision-makers behind the re-
cent rise in protectionist policies around the world. The field of IB is
uniquely positioned to bridge disciplines and methodologies to provide
clarity on how national and international institutions can support
productivity gains driven by more knowledge-intensive globally colla-
borative value chains. Embedding GVC research into such an agenda
may be one of the grand challenges for the future of IB scholarship and
an opportunity for rigorously contextualized and phenomena-driven
interdisciplinary research (Buckley et al., 2017; Teagarden et al., 2018).
Our review has provided an integrative framework through which
scholars can interrogate how productivity gains within global trade are
S.E. McWilliam, et al.
inter-woven with institutional and inter-organizational governance. We
advocate for IB scholars to embrace this agenda to meaningfully sup-
port firms and policymakers in responding proactively and con-
structively to the evolving global business environment.
Declaration of Competing Interest
None.
Funding
This research was supported by an Australian Government Research
Training Programme (RTP) Scholarship.
Appendix A. Supplementary data
Supplementary material related to this article can be found, in the
online version, at doi:https://doi.org/10.1016/j.jwb.2019.101067.
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6
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the data analyses, appendices and various article counts mentioned in the
paper.
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