value chain performance

This has prompted the emergence of several lines of research examining different aspects of the global value chain configuration, including: governance types Buckley and Strange,2015;Gere

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aUniversity Carlos III of Madrid, Business Management Division, C/ Madrid, 126, 28903 Getafe, Madrid, Spain

bBocconi University, Department of Management and Technology, Via Roentgen 1, 20136 Milan, Italy

Received28November2015;accepted29November2016

Availableonline23January2017

JEL

CLASSIFICATION

M16

KEYWORDS

Literaturereview;

Globalvaluechain;

International

business;

GVCconfiguration

Abstract Thispaperreviewstheliteratureonglobalvaluechainconfiguration,providingan overview ofthistopic.Specifically, wereviewtheliteraturefocusingontheconceptofthe globalvaluechainanditsactivities,thedecisionsinvolvedinitsconfiguration,suchaslocation, thegovernancemodeschosenandthedifferentwaysofcoordinatingthem.Wealsoexamine theoutcomesofaglobalvaluechainconfigurationintermsofperformanceandupgrading.Our aimistoreviewthestateoftheartoftheseissues,identifyresearchgapsandsuggestnew linesforfutureresearchthatwouldadvanceourunderstandingofhowfirmsareimplementing newwaysoforganizingandmanagingactivitiesonaglobalscale

©2016ACEDE.PublishedbyElsevierEspa˜na,S.L.U.ThisisanopenaccessarticleundertheCC BY-NC-NDlicense(http://creativecommons.org/licenses/by-nc-nd/4.0/)

Introduction

Avastamountofresearchhasfocusedondifferent

configu-rationalaspectsoffirms’activitiesworldwide.Specifically,

animportantpartoftheliteraturehasfocusedon

explain-ingthereasonsandeffectsoflocatingindividualactivities

inforeigncountries(Lewinetal.,2009;Martínez-Noyaand

García-Canal,2011;RodríguezandNieto,2016;Schmeisser,

2013) Nevertheless, research has increasingly broadened

this perspective to go beyond the analysis of specific

∗Correspondingauthor.

E-mail addresses:vhpaz@ing.uc3m.es (V Hernández),

torben.pedersen@unibocconi.it (T Pedersen).

activities andencompass the whole value chain This has prompted the emergence of several lines of research examining different aspects of the global value chain configuration, including: governance types (Buckley and Strange,2015;Gereffietal.,2005),levelsofdisaggregation (Asmussenetal.,2007;Beugelsdijketal.,2009),geographic scope(Losetal.,2015;MudambiandPuck,2016),andthe upgradingprocessesofthefirmsinvolved(DeMarchietal., 2013;HumphreyandSchmitz,2002;Lemaetal.,2015) Recentstudieshavereviewedtheliteraturethatfocuses

onthe different theoretical perspectivesin global supply chainmanagement(Connellyetal.,2013).However,a com-prehensivereview oftheliterature dealingwiththe state

ofthe artof the global value chain configuration hasnot yetbeencarriedout.Firmsareconstantlytakingdecisions

http://dx.doi.org/10.1016/j.brq.2016.11.001

2340-9436/© 2016 ACEDE Published by Elsevier Espa˜ na, S.L.U This is an open access article under the CC BY-NC-ND license ( http:// creativecommons.org/licenses/by-nc-nd/4.0/ ).

Governance Location Coordination Performance Upgrading

The global valu e chain configu ration

Concept and activiti es Dec isions Implication s

Figure 1 Topicscoveredinthisliteraturereview

inaninterconnectedworldthatnotonlyaffecttheir

struc-tures,capabilities andresults,butalsothoseof theother

agents they interact with It is thus necessary to clearly

identifythedecisionsinvolvedinaglobalvaluechain

con-figurationthathavebeenalreadyexaminedand,fromthat,

the aspects that remain unexplored The purpose of this

articleisthereforetoreviewtheliteratureonglobalvalue

chainconfigurationsinordertosystematizeitandindicate

avenuesforfutureresearch(seeFig.1)

Thestudycontributestoglobalvaluechainliteraturein

severalways We believe that, traditionally,researchhas

beenfocusedonspecifictopicsinvolvedinitsconfiguration

suchasdecisionsonlocation,governanceandcoordination

Areviewexaminingallofthem allowsustobetter

under-standnotonlythecharacteristicsofeachdecisionbutalso

theinterdependenciesbetweenthem.Additionally,itallows

ustoobservethecomplexity ofa global valuechain

con-figurationthatmaybeconstantlyevolvingdue tochanges

incountries,industriesandfirms.Allinall,itallowsusto

identifythetopicsthatremainunexploredandpresentthose

linesofresearchthat,inourview,remainunanswered

Therestofthepaperisstructuredasfollows.First,we

explain the global value chain concept and the different

activitiescomposingit.Secondly,wedescribehowthe

liter-aturehasclassifiedthedifferentvaluechainconfigurations

andthekeydecisionsin designingthe globalvalue chain,

namely governance, geographical scope and coordination

ofactivities Thirdly,we explore theoutcomesrelated to

global valuechain configurationsin terms ofperformance

andupgrading.Finally,wesuggest futurelinesofresearch

andestablishthe conclusions thatcan bedrawnfromthe

study

Over the years, scholars have analyzed different

termi-nology to define how firms organize activities such as

commoditychains(GereffiandKorzeniewicz,1994;Selwyn,

2015), supply chains (Al-Mudimigh et al., 2004; Connelly

et al., 2013; Priem and Swink, 2012), value networks

(de Reuver and Bouwman, 2012; Stabell and Fjeldstad,

1998), etc., depending on the specific relationships that

have emerged among firms and other agents within it

(Gereffi et al., 2001) Commodity chains focus on

exam-iningindustriesandthe authorityand powerrelationships

that have emerged within them to explain the role of a

leadingfirm(Mahutga,2012) -thefirmwhichshapes,

con-trols,coordinatesanddistributesthevaluealongthechain

(AzmehandNadvi,2014).Adistinctionhasthusbeenmade

between buyer-driven commodity chains - in which the

leadingcorporationplaysacentralroleasmerchandiserand makes sure thatall pieces of thebusiness come together - and producer-driven commodity chains - in which the leadingcorporationplaysacentralroleinproduction activ-ities(GereffiandKorzeniewicz,1994).Otherscholarshave focusedontheanalysisofsupplychains,wherethesupply chainconceptexplainsthefirms’relationshipswith suppli-ersandcustomerstodeliverproductorservicesatlesscost (Christopher, 2005) The value chain concept goes a step further, and explains thatentities may beconnected and createavaluewhichisasourceofcompetitiveadvantage (Al-Mudimighetal.,2004;StabellandFjeldstad,1998).This latter concept alsotakesinto accountthecustomers in a privilegedposition(Cox,1999),understanding theirneeds andofferingthemvalue(DiDomenicoetal.,2007),by exam-iningvaluecreationanditscapture(GereffiandLee,2012) Moreover,whenthevaluechaininvolvesaconstellation

oforganizationalarrangementsandfirmsthatare intercon-nected through a global network, the global value chain conceptemerges(DeMarchietal.,2014;GiroudandMirza, 2015; Mudambi and Puck, 2016) Hence, the global value chainisdefinedas‘‘the full range of activities that firms and workers perform to bring a product from its concep-tion to end use and beyond’’, that are carried out on a global scale and that can beundertaken by one or more firms(GereffiandFernandez-Stark,2011,p.4).Specifically, somescholarspointtowardanewsystemcalledthe‘‘global factory’’(Buckley,2011;BuckleyandGhauri,2004),which entailstheorganizationofactivitiesinacomplex configura-tion.Thissystemdescribeshowfirmsmayreducelocation andtransactioncostsbyorchestratingtheglobalvaluechain

insuchawaythatallactivitiesarelinkedbyinternational flows ofintermediate productsthat the MNC controls but doesnotnecessarilyown,andwhereknowledgeis increas-inglyinternalized(BuckleyandStrange,2015)

One of the crucial aspects of building an overview of global value chain configuration is therefore an examina-tionoftheactivitiesinvolved,whichcanbegroupedbased

on different criteria (see Table 1) Porter (1991) differ-entiates primary activities - those related to producing, deliveringandmarketingtheproductorservice -from sup-portactivities.Thelatterareeitherrelatedtocreatingand sourcinginputsorelsetothosefactorsthatareintegralto thefirmandfacilitatetheworkofprimaryactivities,such

asensuringefficiencyandeffectiveness(Priem andSwink, 2012; Tansuchatetal.,2016).It isalsopossible to distin-guishbetweenupstreamanddownstreamactivities,based

ontheir closeness totheexploitation ofraw materials or

to the manufacturing and customization of the product, respectively(Nicovichetal.,2007;Pananond,2013;Singer and Donoso,2008;Verbekeetal., 2016).Mudambi (2008)

Table 1 Classificationofactivitiesinthevaluechain.

Criteria Classification Description Studies

Degreeofinvolvementinthe

productionprocess

Primaryactivities Thoseincludingcreation,

production,logistics, marketingandcustomer service

Porter,1991;PriemandSwink, 2012;Tansuchatetal.,2016

Supportactivities Thoserelatedtoprocurement,

technologydevelopment, humanresourcemanagement, andgeneralinfrastructure

Functioninthevaluechain Upstreamactivities Thoseclosetotheexploitation

ofnaturalresourcesandraw materialsorthoserelatedto design,basicandapplied researchandthe commercializationofcreative endeavors

Mudambi,2008;Mudambiand Puck,2016;Nicovichetal., 2007;Pananond,2013;Singer andDonoso,2008;Verbeke

etal.,2016

Middle-endactivities Thoserelatedto

manufacturingandlogistics

Downstream activities

Thoseclosetotheultimate consumerthataddvaluetothe productbymanufacturingor customization

Thoserelatedtomarketing, advertising,brand

management,after-sales services,etc

Potentialforcompetence

creation

Exploration-related activities

Thosethatcreatenewareasof competencebyextendingthe firm’scapabilitiesandinvolving newcombinationsofresources

CantwellandMudambi,2005; CantwellandPiscitello,2015;

HaandGiroud,2015

Exploitation-related activities

Thosebasedontheexisting firm’scapabilities

Potentialforbeingasourceof

competitiveadvantage

Coreactivities Activitieswhicharedistinctive

andcrucialforcompetitive advantage

Espino-Rodríguezand Rodríguez-Díaz,2014;Gilley andRasheed,2000;

Linares-Navarroetal.,2014; McIvor,2000;Quinn,1999

Essentialactivities Thoseactivitieswhichare

complementaryandimportant forcompetitiveadvantage

Non-coreactivities Thoseactivitiesthatgivelow

addedvaluetothefirm

adds a third typecalled middle-end activities Under this

last approach, upstream activities are those that involve

designandresearch,bothbasicandapplied,andthe

com-mercializationofcreativeendeavors;downstreamactivities

typicallycomprise marketing,advertising, brand

manage-ment,andafter-salesservices;andmiddle-endactivitiesare

relatedtomanufacturing,standardizedservicedeliveryand

otherrepetitiousprocessesinwhichcommercialized

proto-typesareimplementedonamassscale.Activitiesmayalso

bedividedbydistinguishingbetweenthoserelatedto

explo-rationfromthoserelatedtoexploitation,basedonwhether

theyarecompetence-creatingactivities -suchasthosethat

are technologically advanced - or competence-exploiting

activities -suchasthosethatimplylocaladaptationwhile

deploying existing technologies (Cantwell and Mudambi,

2005;CantwellandPiscitello, 2015;HaandGiroud,2015) Other classifications take into account activities’ impor-tance in terms of the firm’s competitive advantage and distinguish between core and non-core activities ( Espino-Rodríguez and Rodríguez-Díaz, 2014; Gilley and Rasheed, 2000;McIvor,2000)orbetweencore,essentialandnon-core activities (Contractor et al., 2010; Quinn, 1999; Linares-Navarro etal., 2014) According to this latter view, core activitiesarethosewithhigh added-value, whichare dis-tinctive and crucial for competitive advantage, and are supposedtobetheonesthefirmperformsbetterthanany othercompany;essentialactivitiesarethoseneededfor sus-taining profitableoperations thatare complementaryand importantfor competitiveadvantage;andnon-core activi-tiesarethosethatcaneasilybeoutsourced

How firms configure this complex system of activities

requiresananalysisofdifferentdecisions,andwewill

exam-inetheseinthefollowingsections

The configuration of a global value chain has evolved in

recent decades Initially, activities were defined in large

blocks ranging from low-end manufacturing and service

activities to R&D,design and engineering More recently,

some scholars have pointed out that the value chain can

no longer be seen as a set of traditional activities, as

firms have engaged in a process of fine-slicing activities

(Beugelsdijketal.,2009;Contractoretal.,2010;Mudambi,

2008;MudambiandPuck,2016).Thisprocessofgenerating

finermodules has several implications On the one hand,

firmshaveimprovedtheirlearningabouttheirownsystems

or about organizing activities in new ways and specifying

connectionsamongthem;ontheother,ithasallowedfirms

toredefinetheircoreandnon-core activities,keepingthe

truecoreactivitiesin-houseandallocatingmoreresources,

timeandefforttothoseactivitiestheydobest(Gilleyand

Rasheed,2000; Linares-Navarroet al.,2014) It impliesa

processofmodularizationthattakeslargegroupsof

activi-ties -suchasthoserelatedtoR&D,productionormarketing

- and disaggregates them into sub-activities (Contractor

etal., 2010) Indeed, specialization may givesome firms

theopportunity todevelop superior capabilities that give

themacompetitiveadvantage(JacobidesandWinter,2005)

Firmsthushavetodecide:howtoorganizetheiractivities

-keeptheminhouse,gotothemarketorusemixedmodes

suchas allianceswith other firms (Casta˜ner etal., 2014;

Gereffietal.,2005),wheretolocatetheseactivities(Jensen

andPedersen, 2011;Los etal., 2015;Mudambi andPuck,

2016), and how to coordinate them globally (Beugelsdijk

etal.,2009;Hansenetal.,2009).Moreover,firmshaveto

takeintoaccountthatthesechoicesmaychangeandevolve

overtimedependingonthecircumstances,andmust

there-forereviewthemcontinuously(Buckley,2011;Buckleyand

Ghauri,2004)

Governance refers to ‘‘authority and power

relation-shipsthat determine how financial, material, and human

resources are allocated and flow within a [value] chain’’

(Gereffi and Korzeniewicz, 1994, p 97) In international

businessliterature,twotraditionalgovernancemodeshave

explainedhowfirmsoperateabroad:basedonhierarchyor

onthemarket.Inotherwords,firmshavetodealwiththe

make-or-buydecisionenouncedinthetransactioncost

the-ory(Coase,1937;Williamson,1975).However,itseemsthat

explainingtheglobalconfigurationofvaluechainactivities

merelythroughahierarchicaloramarketstructure(thetwo

extremes)isfarfromthereality.AsJacobidesandBillinger

(2006)explain,firmscanalsousealliancesandgenerate

par-tialintegrationwithmixedmodes.Whenglobalvaluechains

areanalyzed, arangeof governance optionsthus emerge

(seeFig.2)

Atoneendwefindthemarketgovernancemodeandat

theother,thehierarchymode.Theformerimpliesrelatively

Relational supplier

High Low Degree of explicit coordination

Degree of power asymm etry

Relati onal Capti ve Hierarchy Market Modular

Materials

End Use

Value Chains

Suppliers

Custome rs

Price

Component and mat erial suppliers

Component and mat erial suppliers

Turn-key

Lead firm

Lead firm

Integrat ed Firm Lead

firm

Relational supplier

Capti ve suppliers

Figure 2 Globalvaluechaingovernancemodes(Gereffietal.,

2005,p.89)

simpletransactionsbetweenthefirmsinvolved.Underthis structure,buyersandsuppliersalongthevaluechainneed little cooperation and the cost of switchingto new part-ners is low for both Priceis the mechanism for reaching thedeal(GereffiandFernandez-Stark,2011).Thetendency, however,isthatfirmswithintheglobalvaluechainareever moreconnected,creatinganetwork ofindependentfirms orchestratedorcoordinatedbyaleadingfirm,andproviding

acontextof trustandpowerwithinvolatileenvironments (Buckley, 2016) At the other end, we find the hierarchi-calgovernancemode,whichimpliesverticalintegrationand managerialcontrolwithintheleadfirm.Althoughitisless andlesscommontofindfirmsintegratingthewholevalue chain,thereisresearchthathasfocusedonexaminingglobal value chain configurations basedon foreigndirect invest-mentdecisions(HsuandChen,2009).Thisstructureismore usual when products are complex,codification is difficult andcompetent suppliersarenoteasily found(Gereffiand Fernandez-Stark,2011)

Between thesetwoextremes, we findalternative gov-ernance structures that fit into the Gereffi et al (2005)

classification: modular, relational and captive governance structures.Althoughallofthemarebasedonrelationships withotherfirms,therearealsodifferencesbetweenthem Modular governance implies that suppliersmake products according to a lead firm’s specifications, implying a high volume of codified information flow, while the lead firm concentrates onthe creation,penetrationand defense of markets for end products (Sturgeon, 2002) In a modular mode,supplierstendtobehighlycompetent,providing full-packageservicesandtakingresponsibilityforcertainstages suchasmanufacturingthroughturn-keycontracts(PingQing

etal.,2007;Wad,2008).Foritspart,relationalgovernance

ismorelikelywheninformationismorecomplex,not eas-ilytransferredandwhengreaterlevelsofinteractionsand knowledge-sharingbasedonmutualtrustandsocialtiesare needed (Altenburg, 2006) Relational governance implies that coordination is organizedby social relationships and sharednorms(PoppoandZenger,2002).Italsoallowslead firmsandsupplierstoquicklyrespondtochangingconditions usingnormsofreciprocityforresolvingconflicts(Sturgeon,

2002) Lastly, captive governance structure is the gover-nancemodethatentailsgreaterdependenceforsuppliers,

Table 2 Studiesofthegovernancestructuresofglobalvaluechains.

Characteristicsofgovernance

structures

Governancemodestakinginto accounttheauthorityand powerrelationshipswithinthe globalvaluechain

Altenburg,2006;Gereffietal.,2005; GereffiandFernandez-Stark,2011;Hsuand Chen,2009;JacobidesandBillinger,2006; Sturgeon,2002

Externalconditionsaffecting

governancestructures

Industryconditionssuchaslife cycle,entrybarriers,changes

inthemarket,etc

Buckley,2011;GereffiandLee,2012; Mahutga,2012;Qianetal.,2012

Internalconditionsaffecting

governancestructures

Firmconditionssuchassize, firmabilitytoorganizethe valuechain,firmcapabilitiesin specificactivities,etc

BuciuniandMola,2014;Buckley,2016; BuckleyandStrange,2015;DeMarchi

etal.,2014;GiroudandMirza,2015; Mudambi,2008;MudambiandVenzin,2010; Qianetal.,2012;Yeniyurtetal.,2013

whichoperate underthelead firms’conditions,withhigh

degreesofmonitoringandcontrolfromthem(Gereffietal.,

2005).Thisimpliesthatsuppliersareinaworsepositionfor

bargainingforhighersellingpricesbutabetterpositionfor

receivingsupportfromleadfirms(Altenburg,2006)

The configuration of the value chain in each of these

governancestructuresmaydependonseveralfactors.First,

externalconditions,suchasthoseintheindustry,mayaffect

thegovernancestructuresinthevaluechainconfiguration

Qianetal.(2012)relatethelikelihoodofinternalizingvalue

chainactivitiestothelifecycleoftheindustryandwhether

thefirm isan early moverora lateentrant.Indeed,

gov-ernancemodesmayvaryovertimeastheindustrymatures

andevolves(GereffiandLee,2012).Theexistenceofentry

barriers may also affect governance structures Mahutga

(2012) explains the existence of modular and relational

valuechainswhenentrybarriersarehigh,captiveand

hier-archicalvaluechainswhenentrybarriersareintermediate,

andquasi-marketandmodularvaluechainswhenentry

bar-riersarelow.AsBuckley(2011)concludes,thedynamicsof

theindustryandchangesinthemarket,suchascustomer

demand or technologies, also determine the structure of

theglobal value chainunder integratedor non-integrated

structures

Second, there are other relevant internal conditions

withinthefirmsthatcanaffect thegovernancemode.De

Marchi et al (2014) point out that the position of the

lead firm in buyer-drivenand producer-driven commodity

chains is different, implying different governance

struc-tures.Studieshavealsoconsideredfirmfactorssuchasthe

size ofthe firm toexplaingovernancestructures (Buciuni

andMola,2014;Rozaetal.,2011).Thechoiceofone

gov-ernancestructureoranothermayalsodependonwhether

ornotthefirmhasthespecificcapabilitiesrequiredto

inte-grateactivitiesalongthevaluechain.Internalizingactivities

requirescapabilitiesrelatedtocoordinating,organizingand

managing affiliates (Qian et al., 2012), so vertical

inte-gration is attractive for firms with the capabilities that

helpthemtostimulatecross-activitycoordination,learning

andinnovation(Mudambi,2008).Alternativemodesrequire

other capacities,such as relational and networking

abili-ties (Giroud andMirza, 2015) Specifically, firmstrying to

implementa global strategythroughpartnershipsneed to

possesstheskillsandcapabilitiesthatallowthemto man-agethemeffectivelyandefficiently,suchastheability to share information and the ability to develop global and local responsiveness (the ability to initiate actions based

onknowledgegeneratedanddisseminatedacrossthe orga-nization)tosuppliers(Yeniyurt etal.,2013) Additionally, firmsmaychoosedifferentgovernancemodesdependingon thecapabilitiestheyhaveincertainactivities.AsMudambi andVenzin(2010)explain,firmsaremorepronetomaintain controloverthevalue chainiftheyhavestronger compe-tenciesin manufacturing or standardized servicedelivery, andmaylinkthemtomoreknowledge-intensiveactivities

inR&D,designandmarketing.Ontheotherhand, special-izationand focuson controlling certainactivities is more likelyincompanieswithstrongerdynamiccompetenciesin internalknowledge-intensiveactivitiesbutweaker compe-tencies in linking standardized and specialized activities

Table2offersan overviewofthestudies analyzing differ-entaspectsofgovernancestructuresinaglobalvaluechain configuration

Despite the amount of research on this topic, we can finish this subsection by suggesting some lines for future research.Existing researchhasexamined firm features to explaingovernancedecisionsintheglobalvaluechain,but opportunitiesforbroadeningourunderstandingstillremain

Ontheonehand,firm’sfactorsaffectingglobalvaluechain configurationmayberelatedtotheownershiptypeof lead-ingfirms.Somescholarspointtothisaspectasafutureline

ofresearch in which, for example, familyand non-family firmsarecompared(FernándezandNieto,2014).Itwould alsobe interesting totest empirically the implications of thedifferentgovernancemodesdescribedintheliterature Scholarshavetraditionallyfocusedoncomparingdifferent governancemodes for specific activities (Casta˜ner etal., 2014;NietoandRodríguez,2011;RodríguezandNieto,2016) and only scant research has considered the global value chainastheunitofanalysis(BuciuniandMola,2014) Addi-tionally,aswehaveseeninthisreview,mostofthestudies adoptastaticperspectivewhenexaminingthegovernance decisionsaroundtheconfigurationoftheglobalvaluechain Nevertheless, as technologies evolve, the comparative advantages of countries change, new specialized suppli-ersappear,andactivities becomemorestandardized The

increase.Firmsmaythereforereconfiguretheirvaluechains

innewways.Scholarshavetorecognizethesechangesand

movementsin order toexplain the evolution of decisions

relatedtothegovernancestructureoftheglobalvaluechain

andexplainthedynamicsthatemergewithinitovertime

The fragmentation of the value chain has also entaileda

dispersion of activities around the globe Thus,

manage-mentliteraturehasusedtheterm‘‘globalvaluechain’’for

thosecases in which some functions are located in other

countries.However,limitations existin this literature for

differentreasons First, some studies examining the

geo-graphical scope of firms’ activities claim that we cannot

talkabout globalbut onlyabout aregionaldistributionof

them(Rugmanetal.,2009).Somescholarsexplainthat

pro-ductionoccursinregionalblocksthatcanbegroupedinto

three‘‘Factories’’:FactoryAsia,FactoryNorthAmericaand

FactoryEurope(BaldwinandLopez-Gonzalez,2015).MNEs

managingglobalnetworksareincreasinglyinclinedtowork

withfewer,largerandmorecapablesuppliers,operatingin

areducednumberofstrategiclocationsaroundtheworld,

andfavoringregionalization(GereffiandFernandez-Stark,

2011).Los etal (2015) explain,however, that this trend

doesnotreflectreality andthatregionaleffects couldbe

explainedbythe factthat somestudies examinetrade in

terms of intermediateinputs instead of thevalue added,

thus overestimating the internal regional trade in

down-streaminputs

Second, strategicmanagementliteraturehasexplained

thatfirmsshoulddispersetheiractivitiesgloballyandchoose

thebestlocationsforthemtoobtainacompetitive

advan-tage (Gupta and Govindarajan, 2001) Nevertheless, the

researchhasfocusedontheanalysisofspecificactivitiesand

howthereshouldbeamatchbetweenthemandthe

charac-teristicsofthehostcountry(DemirbagandGlaister,2010;

Hsu and Chen, 2009; Jensen and Pedersen, 2011; among

others).Althoughthesestudiesshowthereasonsfor

locat-ingdifferentactivitiesinspecificcountriesandthebenefits

thusobtained,theydonotshowthegeographicalscopeofa

valuechain,nortakeintoaccountthecomplexityoftoday’s

businessworldorthebroaderrangeofthefirm’sstrategic

choices(WiersemaandBowen,2011).Thekeyisthereforeto

examinethesecomponentsasawhole(MudambiandPuck,

2016).Otherwise,itwouldbeimpossibletotakeinto

consid-erationseveralfactorsthatarenecessaryforevaluatingthe

effectsofaglobalvaluechainconfiguration.Someresearch

isadoptingthisperspectiveofincludingthewholesystem,

inordertoexplorethe‘‘degreeofglobalness’’ofthevalue

chain (Verbeke and Asmussen, 2016) Similarly, Asmussen

etal.(2007)identifythreetypesofvaluechain

configura-tionsbytakingintoaccounttheMNEs’geographicalscope

-international,multi-domesticandglobalvaluechains.This

vision,however,focusesontheexaminationofMNEsasthe

unitofanalysis,whichmayhidetheexistenceofglobalvalue

chainsthatincludeexternalizedandinternalizedactivities

Mudambi and Puck (2016) conclude that the footprint of

MNEsisglobal whenavalue-chain basedapproachis used

whichalsoincorporatesalltheexternalizedactivities.More

studiesarethereforeneededtoexplainthisissue

Moreover, another important issue to consider when activities are globally dispersed is how firms may need

to adapt to local market differences while at the same timeneedingtoexploiteconomiesofscale andscopeand maximizeknowledgetransfersacrosslocations(Guptaand Govindarajan,2001).Configuringaglobalvalue chainmay implymanagingheterogeneouslanguages,cultures, regula-tions,etc.Thecapabilitiesrequiredineachmarketusually differ, and this pushes firms to implement higher levels

of monitoring and control (Gereffi et al., 2005) Firms maybalancetheirinternalembeddednesswiththeexternal embeddedness in each host country (Meyer etal., 2011) Moreover, capabilities and the learning effect needed to managedifferentlocationsmaybedifferentdependingon thetypeofvaluechainactivityconsidered(Verbekeetal.,

2016).Moreresearchisthereforeneededinordertoexplain howfirmssolvethechallengestheyencounterwhenfaced withadiversityof institutionsand discoverwhichaspects firms may change in order to smooth potential negative impacts

Lastly,theliteraturehasexplainedthatthereare contin-genciesthataffectfirmsintheiroptionsforgeographically configuringaglobalvaluechain.Somescholarsnotethatthe typeof industryisa factortoconsiderassomeindustries arerestrictedbyentrybarriersthatmakeitmoredifficult

toconfigurevaluechainsonagloballevel.Mahutga(2012)

arguesthatthelikelihoodofglobalvaluechainsexistingis greaterinindustriesthathavelowentrybarriersto manu-facturing,suchasthegarmentindustry,astherearemore optionsforexternalizingandfindingsuppliersglobally.From

afirmperspective,itisimportantthatfirmshave aglobal orientation(ZouandCavusgil,2002).Whenfirmsconfigure

aglobalstrategytheyneedtohaveaglobalmindset(Murta

etal.,1998)andsomecapabilities,suchascultural aware-nessorlocationalflexibility,arecriticalfactorsforsuccess whenconfiguringaglobalvaluechain(Erikssonetal.,2014) Additionally, firmshavinggreaterorganizationaland tech-nological capabilities for coordinating a dispersed set of economic activities may more easily reach a global con-figuration(Levy,2005).Nevertheless,futureresearchmay explainhowfirmsmaychangethe‘globalness’oftheirvalue chains.Therearefirmsthatarebornwithaglobalmandate andconfigureaglobalvaluechainfromtheverybeginning Therearealso,however,firmsthatdeveloparestructuring processin ordertomake theirvaluechainsglobal or sim-plybecauseagentsinthevaluechainchangetheirlocation decisions.Differencesbetweenthem,theirdecision-making processesandtheirimplicationswouldbeaninterestingline

ofinvestigation.Tosummarize,Table3offersan overview

of thestudies analyzing thelocationdecisionsof aglobal valuechainconfiguration

Considering the mixof activities together withtheir gov-ernance and location decisions, a global value chain configurationrequiresdecisionstobetakenaboutthe coor-dination between actors at different functional positions (Ponte and Gibbon, 2005) In this regard, one of the key issuesintheglobalvaluechainliteratureistheroleofthe lead firm.Moreover,the need for coordinationalsoarises

Table 3 Studiesconsideringthegeographicscopeofglobalvaluechains.

Degreeof‘globalness’ Regionalvs.global Asmussenetal.,2007;Baldwinand

Lopez-Gonzalez,2015;Gereffiand Fernandez-Stark,2011;Losetal.,2015; MudambiandPuck,2016;Rugmanetal., 2009;VerbekeandAsmussen,2016

Externalconditionsaffecting

thegeographicscopeofglobal

valuechains

Industryfactors Mahutga,2012

Marketdifferences Gereffietal.,2005;Guptaand

Govindarajan,2001;Meyeretal.,2011

Capabilitiesrequiredinglobal

valuechains

Organizationaland technologicalcapabilities

Erikssonetal.,2014;Levy,2005;Murta

etal.,1998;ZouandCavusgil,2002

from the necessity to simultaneously combine different

operationmodesintheirvaluechains(Benitoetal.,2011,

2012).Specifically,firmsmaycombinegovernancemodesin

thedifferentactivitiesofthevaluechaininaforeign

mar-ket, or combine mode packages for an activity in one or

more countries(Benito etal., 2009) Asituation like this

impliesthatfirmsneedtofindabalancebetweenthe

bene-fitsofanoptimalgovernancestructureandthecostsderived

fromgreaterorganizationalcomplexity(Benitoetal.,2011)

Moreover,theyhave tocoordinategovernancemodes

sup-porting the firm’s objectives (Petersen and Welch, 2002),

while at the same time taking into account that each

modeofoperationrequiresadifferentcombinationofskills

(CasillasandMoreno-Menéndez,2014)

Anotherinteresting lineof researchexplainshow

man-agerscombine modes,applyand evaluatedifferentmode

packages(Benito etal., 2009).As Asmussen etal (2009)

highlight, companiesinvolved in a global strategy require

that spatiallydispersed activities are tightlycoordinated

Managing a global value chain implies taking governance

decisionsacrossdifferenthostcountriesandactivitiesthat

cannot be considered independently because there are

interdependenciesbetweenthem,intermsofstrategic

con-trol and learning (Hashai et al., 2010) Challenges then

emerge as, in most cases,firmshave to managenotonly

theirinternal networksbut alsotheexternal ones.Having

connectionswithseveralsuppliersalongthevaluechainmay

increase confusionandinformationoverload (Chiu, 2014)

Future research should consider this pattern, examining

interdependencies betweengovernanceandlocation

deci-sionsandthefactorsthatcouldfacilitateglobalvaluechain

coordination

Moreover,thesecoordinationactivitiesrequireadynamic

perspectivetoexplainhowandwhyfirmschangeoperation

modes(Benitoetal.,2012).Literatureshowsthatfirmshave

to be constantly reexamining the global redistribution of

capabilities(Lemaetal.,2015).Specifically,theleadfirm

hastotakeintoaccountchangesinotherfirmsintheglobal

value chain and their evolution, because these can

mod-ifythecapabilitiesofthoseotherfirmsandthusaffectthe

coordinationofactivitiesandmarketsinthevaluechain(De

Marchietal.,2014).Acombinationofdecisionsmightthus

beoptimalat agivenpoint intime,butnotin thefuture

(GuptaandGovindarajan,2001).Firmshavetobeawareof

thepossibilityofchangingtheirdecisions.Futureresearch

couldempiricallyexaminetheevolutionandchallengesthat thedifferentfirmsinvolved intheglobal value chainmay encounter

Anotherinterestingtopicisrelatedtothewayfirms coor-dinatetheseactivitiesworldwideandconsidersthedegree

of replication of activities in different locations Specif-ically, some scholars distinguish between dispersed and concentratedglobal value chains(Hansen etal., 2009).A dispersedglobalvaluechainimpliesthereplicationof activ-itiescountrybycountry,makingmultinationalunitsoperate independently.Thismatchesoneofthetypesofvaluechains identified by Yip (1989, p 31), the multi-domestic firm configuration,inwhichforeignsubsidiariesareautonomous units with ‘‘all or most of the value chain reproduced

in every country’’. This configuration implies the exist-enceofaffiliatesoperatingindependentlywithlowerlevels

of coordination needs and more focus on satisfying local responsiveness(Hansenetal.,2009).However,itsacrifices thepotentialbenefitsofscaleeconomies(Beugelsdijketal.,

2009)andatthesametimeincurscostsderivedfrom repli-catingsubsidiaries,lackofstandardization,etc.,whichare theprosoftheglobalstrategy(MoonandKim,2008)

A concentrated global value chain, conversely, implies thecreationofhighlyspecializedaffiliates,eachwitha geo-graphicscopethattranscendsalocalmarket(Frostetal.,

2002),whichoperatewithother affiliatesinanetwork.In

anextreme case, each valuechain activity takesplacein

adifferentcountry.Thiswouldallowfirmstobenefitfrom thevariousadvantagesderivedfromthedisaggregationand modularization of the value chain into independent units (Beugelsdijketal.,2009).Thisconfiguration isconsidered

todefine a pure global firm (Asmussen etal., 2007; Roth

etal., 1991;Yip,1989).Nevertheless,it involvesa global distributionofworkwithgeographicandtimegapsbetween worklocations,whichmaygenerateproblems.First,itmay imply costs related to transportation, tariffs, delays, or

todependencies onaspecific location(Giroud andMirza,

2015).Second, unexpected costs may emerge thatderive fromthegreatercomplexityofimplementingtheoffshoring

of functions (Larsen et al., 2013) Third, dispersion and disaggregationmayalsoimplymanagementand communi-cationeffortsandcontroldifficultiesduetothesignificant numberofactivitiesdividedintodiscreteslices.These addi-tionaleffortsanddifficultiesmay,atsomepoint,exceedthe potentialbenefits (Contractor et al.,2010; Kumar etal.,

Table 4 Benefitsanddrawbacksofdispersedandconcentratedglobalvaluechains.

Benefits Drawbacks Studies Dispersedglobal

valuechain

Reducecoordinationcostsand dependencies

Satisfylocalresponsiveness

Replicationcostsappear

Sacrificeeconomiesofscale

Beugelsdijketal.,2009; Hansenetal.,2009;Moonand Kim,2008

Concentratedglobal

valuechain

Exploitarbitrageofnational differences

Achievespecializationand disaggregationadvantages

Transportationcosts,tariffs, delays

Costsofimplementation

Morecommunication, coordinationandcontrolneeds

Overdependenceand opportunism

Contractoretal.,2010;Giroud andMirza,2015;Hansenetal., 2009;Kumaretal.,2009; Larsenetal.,2013;Mauriand NeivadeFigueiredo,2012

2009).Lastly,costsrelatedtoopportunismaresignificant,

especiallyin concentrated value chains that use partners

and do not internalize activities (Hansen et al., 2009)

Firmsoperatingwithinthistypeofconfigurationhavefewer

redundanciesbutat thesametimearemorerisk-exposed

becauseofthelowermarginforerrorsandgreaterexposure

to unforeseen outcomes (Mauri and Neiva de Figueiredo,

2012).Thisconfigurationthusrequiresorganizationaldesign

mechanisms, such asnetwork structures, modularization,

delegation, electronic communication infrastructures and

standardizinginterfaces(Pedersenetal.,2014;Ponteand

Gibbon, 2005; Srikanth and Puranam, 2011) Additionally,

offshoring experienceand a strong orientation toward an

overallsystemofstructuresandprocesseshave been

con-sideredtobefactorsthatallowfirmstoanticipatethecosts

ofthedispersionofactivitiesandavoiditsnegativeeffects

(Larsenetal.,2013).Table4summarizes thebenefitsand

drawbacksofeachtypeofcoordination

Nevertheless,manyotheraspectsremainunderexplored

Aninterestinglineofresearchinthisareamaybetoexamine

thesecoordinationstructuresbyconsideringdifferentfirm

factorssuchassize Traditionally,global valuechain

con-figurationhas mainly been exploredthrough the study of

largefirms.Theyhavebeenconsideredtohavemoreofthe

resourcesandcapabilitiesthatenablethemtodesign

inte-gratedstructures.Adispersedorconcentratedvaluechain

may,however,implydifferentchallengesandopportunities

for SMEs Other factors such as the value chain’s

owner-shipstructure andcountryoforigin, thedynamism ofthe

industry,etc.,mayalsoberelevant

Allinall,inordertosystematizealltheaspectscovered

above,we created Table 5to providean overviewof the

studiesanalyzing howthe activitiesofglobal value chains

arecoordinated

configurations

The literature has also explained some of the outcomes

fromglobalvaluechainconfigurations.Specifically,scholars

haveposited thatan effective global value chain

configu-rationmayhaveapositiveimpactonbusinessperformance

(Kim et al., 2003) Similarly, some literature examining

inward-outward connections explains the positive effects

on firm growth resulting from the connections between international activities in the upstream and downstream partsofthevaluechain(HernándezandNieto,2015).Other performance measures have also been examined Some scholars have highlighted the fact that activities related

to the upstream side of the value chain may generate advantages for activities related to the downstream side

of the value chain, suchas international sales (Bertrand, 2011; Di Gregorio et al., 2009; Hätönen, 2009) These studies are common when the firm is examined as the unit of analysis Less research exists, however, into how differentfirmswithinaglobal valuechain, generatetheir performanceorhowthevalueisappropriatedbetweenthe different agents An exception is the study by Kaplinsky (2000) which, from a macro-level perspective, explains that some partiesgain and other lose in theglobal value chain and suggestssome movements that could be made

by the economic actors to reverse that situation Other researchgoesbeyondperformancegenerationandexplains mechanisms that enable value appropriation Specifically,

it hasbeen argued thatiflead firmsareabletoleverage powerovertheirsupplierstheymayappropriatethevalue generated, since they may increase flexibility and take advantage of external competencies in terms of better qualityorlowercosts(BuckleyandStrange,2015)

Anotherimportantissueexploredintheliteratureabout theimplicationsofvaluechainactivitiesisrelatedto innova-tionperformance.Chiu(2014)positsthatsupplierdiversity allowsfirmstoenablenewskillsandtechnologies,improve theirassimilativepower,andbroadenperspectives,andall thishelpsfirmstotracknewdiscoveriesandadvances Addi-tionally,oneimportanttopicinthisareaisalsorelatedtothe appropriationofthevaluegeneratedbyinnovationswithin

a global value chain model Hence, Dedricket al (2009)

describedifferencesrelatedtohowthecontrolofkey ele-mentsenables somefirmstocapture supernormal returns

oninnovation.Fromadifferentperspective,focusedonthe complementaryassetsofleadfirmsformakinginnovationsa commercialsuccess,Shinetal.(2009)arguethatthesefirms maycapturemorebenefitsfrominnovationsevenwhenthey aredevelopedbynon-leadfirms

Table6 offers an overview of the literatureexamining the different performance implications of a global value chainconfiguration.Despitetheresearchwehavereviewed,

weconsiderthatmoreliteratureisespeciallyneededthat

Table 5 Studiesconsideringcoordinationdecisionsofglobalvaluechains.

Coordinationofactorsinthe

valuechain

Analysisoftheroleofleadfirmsin control,coordinationanddistributing value

AzmehandNadvi,2014;Ponteand Gibbon,2005

Coordinationofoperation

modesinthevaluechain

Examinationofhowtocombine operationmodesinthedifferent activitiesinvolvedintheglobalvalue chain

Asmussenetal.,2009;Benitoetal., 2009;Benitoetal.,2011;Benitoetal., 2012;CasillasandMoreno-Menéndez, 2014;Hashaietal.,2010;Petersenand Welch,2002

Evolutionofthecoordination

oftheglobalvaluechain

Studyofdynamicsintheglobalvalue chainovertime

Benitoetal.,2012;DeMarchietal., 2014;Lemaetal.,2015

Coordinationofactivities Characteristicsofconcentratedand

dispersedglobalvaluechains

Beugelsdijketal.,2009;Contractor

etal.,2010;Frostetal.,2002;Hansen

etal.,2009;MauriandNeivade Figueiredo,2012

Explanationofcoordination mechanismsneededintheglobal valuechain

Pedersenetal.,2014;PonteandGibbon, 2005;SrikanthandPuranam,2011

examinestheperformanceoutcomesofaglobalvaluechain

configuration from a strategic management perspective

Specifically, more studies are needed that analyze how

thedifferent globalvalue chain configurations(which

dif-ferintermsofgovernance,geographicscopeandlevelsof

coordination),mayaffectleadfirms’performanceandthe

outcomesoftherestoftheagentsintheglobalvaluechain

Moreover,itisnecessarytoshedlightonthewayeachagent

contributestofinancial profitor other outcomes andhow

changesinmarketconditionsmayaffecttheirdistribution

(ContractorandReuer,2014)

Another line of research,which is related tothe

innova-tion aspect we explainedbefore, is focused onanalyzing

theimprovementininnovationcapabilities.Somescholars

positthatthesecapabilitiesmayappearinleadfirms,but

also in subsidiaries and independent suppliers in foreign

countries(Lemaetal.,2015).Thistopicconnectswiththose

studies that have examined upgrading processes derived

fromglobalvaluechainconfigurations.Gereffietal.(2005)

defineupgradingas‘‘the process by which economic actors - nations, firms and workers - move from low-value to rela-tively high-value activities in global production networks’’

(p 171) Both lead and supplier firms can upgrade their capabilitiesasaconsequenceof aglobalvalue chain con-figuration.Andtheycanupgradeinseveralways:product, process, functional and inter-chain upgrading (Humphrey andSchmitz,2002;Blazek,2015).Butspecialemphasishas beengiventotheupgradingprocessforlocalproducersthat canlearnfromglobalbuyers

Somescholarspointout,indeed,thatitistheleadfirms thatarethe ones thatcan affect theupgrading potential

ofthe rest of the actorson that value chain(Azmeh and Nadvi,2014).Alsorelatedtothis,entitiesfromdeveloping countriescan really experiencean upgrading processand movefrom developing low-value addedactivities to high-valueaddedones(Pananond,2013).Thesefirmshavegained access to global markets (Gereffi et al., 2005) Indeed, some literature focuses on how this upgrading process hasallowed emergingmarket firmsto undertakeoutward internationalizationasaresultoftheknowledge acquired

Table 6 Studiesexplainingtheperformanceimplicationsofglobalvaluechainconfigurations

Firmgrowth Effectiveconfigurationoftheglobal

valuechain

Kimetal.,2003

Connectionsbetweenactivities HernándezandNieto,2015

Appropriationofvalueamongactors

intheglobalvaluechain

BuckleyandStrange,2015;Kaplinsky, 2000;Shinetal.,2009

Internationalexpansion Connectionsbetweenactivities Bertrand,2011;DiGregorioetal.,

2009

Offshoringofvaluechainactivities Hätönen,2009

Innovationperformance Benefitsofdiversity Chiu,2014

Appropriationofthevalueof innovations

Dedricketal.,2009

Table 7 Studiesexplainingupgradingimplicationsofglobalvaluechainconfigurations.

Upgradingcapabilities Innovationcapabilities Lemaetal.,2015

Affectingproduct,processes, andfunctions

HumphreyandSchmitz,2002;Blazek,2015

Upgradingprocessesof

developing-countryfirms

Knowledgetransfersfrom developed-countryfirms

AlcácerandOxley,2014;AzmehandNadvi, 2014;Gereffietal.,2005;LuoandTung, 2007;Makinoetal.,2002;Pananond,2015

Socialupgrading Barrientosetal.,2011;Clarkeand

Boersma,2015;Connellyetal.,2013;

DeMarchietal.,2013;GereffiandLee, 2016;Kaplinsky,2004

Factorsaffectingupgrading

processes

Industryfactors GereffiandFernandez-Stark,2011

Typesofglobalvaluechains Hansenetal.,2009;Humphreyand

Schmitz,2002

fromtheinward internationalization carriedout by

West-erncountriesin developing nations(Luo andTung, 2007)

As a result, firms from emerging countries are becoming

moreandmoreimportantplayersintheinternationalarena

and their countries are not just the recipients of

activi-ties from developed-country firms This process has also

impliedthatfirmsfromemerginganddeveloped countries

have differentmotivations and ways of configuring global

value chains Firms from emerging countries may locate

theirR&Dandmarketingactivitiesinadvancedeconomies

inordertodevelopcapabilitieswhichallowthemtocatch

upwiththeirrivalsfromdevelopedcountriesandare

nec-essarytocompetethere(LuoandTung,2007;Makinoetal.,

2002).Moreover,thisisawayofthencounter-attackingtheir

globalrivalsintheirowndomainsandawayofovercoming

theirlatecomerdisadvantage,especiallyinaspectsrelated

toconsumerbase,brandrecognitionandtechnological

lead-ership(Pananond,2015).Nevertheless,some researchhas

explainedthatfactorssuchinternalcapabilitiesaswellas

towhomyousupply,impactthedegreeoflearningachieved

(AlcácerandOxley,2014)

A global value chain configuration can have

addi-tional implications related to other upgrading processes

Firms from developing countries may also achieve social

upgrading1(Barrientosetal.,2011).Infact,theseaspects

haveimpliedabroadrangeofquestionsinrecentliterature

withindifferent areas From a human resources

manage-mentperspective, scholarsareincreasingly worried about

explainingtheimplicationsforworkingconditionsandrights

(Clarke and Boersma, 2015); from the point of view of

corporate social responsibility management, scholars are

exploringtheimplications for thelevel of awarenessthat

leadfirmshaveabout thepracticesalongthewholevalue

chain(DeMarchietal.,2013);froman institutionalpoint

of view, studies are exploring the possible evolution and

upgradingofhostcountryinstitutions(Connellyetal.,2013;

Kaplinsky,2004).Allinall,thissocialupgradingprocessis

drivenby differentfactors,requires differentmechanisms

1 Social upgrading refers to the process of improving the rights

and entitlements of workers and enhancing the quality of their

employment.

and different actors are involved in it (Gereffi and Lee,

2016)

Upgradingprocessesmaybeaffected byother factors Theliteraturehasconsideredthatupgradingpathsdepend

ontheindustryandtheinput -outputstructure.Some indus-triesrequirelinearupgrading activitybyactivity,whereas others, especially thoserelated to services,present non-linearupgradingpaths(GereffiandFernandez-Stark,2011) Similarly, different types of global value chains may also affectupgrading.HumphreyandSchmitz(2002)explainthat quasi-hierarchicalchainsofferbetterconditionsforprocess andproductupgradingbutworseforfunctionalupgrading For their part, Hansen et al (2009) conclude that there aredifferencesbetweenfirmsimplementingdispersed ver-sus concentrated value chain configurations in terms of thelikelihoodofupgrading localpartners fromdeveloping countries And it is this upgrading which may most pro-foundlyaffectlocalpartners.Table7offersanoverviewof thestudies explainingtheupgrading outcomesofaglobal valuechainconfiguration

All in all, more research could extend this line of lit-erature Upgrading has been mainly explored from the viewpointofhowemerging-countryfirmshaveparticipated

in the global value chains of Western firms and have upgradedtheirpositionswithinthesevaluechains(Buckley andStrange,2015).Futureresearchcouldalsoexplorehow thisprocessmayalsoimplythatthesefirmscoulddevelop their ownglobal value chainsandhowthetransformation arises.Anothertopicthatisinterestingandremains under-exploredisthecaseofdowngrading,whichmeansthatfirms may voluntarilyor involuntarily move toward the produc-tionofsimplergoodsorfocusonlowerorsmallersegments (Barrientosetal.,2011;Blazek,2015).Futureresearchmay examinethemechanismsneeded foravoiding thisprocess

orforrecognizingitastheoptimalstrategy

To summarize,thepurposeofthisstudy wastorevisethe literaturearoundglobalvaluechainconfigurations.Todoso,

wehavefocusedonthreeareas.Firstly,wehavereviewed theliteraturethatdefinestheconceptoftheglobal value