Supplier strategy in global value chains: shaping governance and profiting from upgrading

Abstract The growth of emerging market firms with a global presence highlights the need to better understand how supplier strategy influences global value chains (GVCs). We respond to this need by applying corporate strategy and technology strategy to improve the predictive and prescriptive power of GVC theory. Under what circumstances can suppliers in GVCs shape governance and profit from upgrading? Using corporate strategy, we argue that supplier strategy concerning make-or-buy decisions and buyer diversification can effect a change in governance mode. Using technology strategy, we identify appropriability regimes and complementary assets as essential preconditions for suppliers to capture value from upgrading. Our central contribution is in developing an integrative theoretical framework for analyzing how suppliers alter governance over time, and how they capture the value they create by upgrading, resulting in shifts in value chain polarity. This framework has significant implications for economic development.