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

Carlo Pietrobelli () and Federica Saliola ()
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Federica Saliola: Department of Law, Università degli Studi Roma Tre

No 702, Working Papers from CREI Università degli Studi Roma Tre

Abstract: There is an growing literature exploring the increasing fragmentation of production processes and the evolution of internationally-dispersed but functionally-integrated economic activities. However, most of this literature appears to neglect an important part of the story, that is the form and the organization of the relationships (the governance) among the various actors involved in these activities, and their implications for development. We develop this analysis in this paper, and explore it empirically with a new dataset on Thailand. In order to address this issue, we study global and domestic value chains in Thailand, and develop a quantitative measure of their governance, which takes into account different levels and types of buyers' involvement with suppliers' activities. We then use this measure to explore econometrically its relationship with suppliers' performance. An important finding is that the relationships MNCs have with their suppliers is multifold and generally more intense than for domestic value chains. Our estimates suggest that more intense buyers' involvement with local suppliers, not only in the definition of products' characteristics, design and quality, but also in technology dissemination and R&D is generally associated with higher suppliers' productivity. However, the governance of the value chain appears to affect the productivity of domestic value chains' suppliers to a greater extent than for firms supplying MNCs or for exporters. We suggest that this result may be explained by the different nature of the information and knowledge being exchanged, and by the gaps between the leader and its suppliers.

Keywords: North-South; Keywords: Global Value Chains; Multinational Corporations; Foreign Direct Investment; Upgrading; Productivity (search for similar items in EconPapers)
JEL-codes: F23 O14 O33 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cse, nep-knm and nep-sea
Date: 2007-01, Revised 2007-01
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Persistent link: https://EconPapers.repec.org/RePEc:rcr:wpaper:07_02

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