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9

GLOBAL PRODUCTION NETWORKS

Neil M. Coe

Introduction

The world economy has changed profoundly in recent times. It is now widely accepted that organizationally fragmented and geographically dispersed production systems constitute the dominant ‘architecture’ of the contemporary global economy. These systems, which have risen to prominence since the 1990s, are tightly controlled and coordinated by lead firms that derive power from their dominant position in either intermediate or final consumer markets. In its World Investment Report 2013, for instance, UNCTAD estimated that some 80 per cent of international trade was now organized through so-called global value chains/production networks (UNCTAD, 2013). Their emergence has posed key challenges to theories from International Business (IB) that primarily focus on the transnational corporation (TNC) and its directly owned operations to understand the organizational and developmental dynamics of the global economy. Instead, theories are required that can accommodate the complex global webs of equity, non-equity and market relations through which the production and circulation of goods and services are increasingly controlled and coordinated. In this context, since the 1990s, significant progress has been made in developing global chain/network approaches for theorizing the organizational complexities of the contemporary global economy. Although first initiated in economic sociology, since the early 2000s economic geographers have made a notable series of contributions to this burgeoning field, primarily under the rubric of the global production network (GPN)¹ framework.

In general terms, GPN research seeks to develop a conceptual framework linking the processes of global production network formation and organization to differential developmental outcomes. A global production network can be defined as an organizational arrangement, comprising interconnected economic and non-economic actors, coordinated by a global lead firm, and producing goods or services across multiple geographical locations for worldwide markets (Coe & Yeung, 2015). This approach thus focuses squarely on the actors that constitute GPNs, with a lead firm, i.e. a powerful transnational corporation, being a necessary prerequisite, and on the multiple locations that are bound together by the economic relations between those various actors. In this sense, the idea of a global production network highlights the actor-specific coordination and cooperation strategies through which such networks are constructed, managed and sustained, and their on-the-ground developmental implications.

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Against this general backdrop, this chapter seeks to do three things. First, it will very briefly map out the intellectual lineage and core elements of the GPN approach. Second, it will profile recent developments in the field that collectively constitute an attempt to develop a ‘GPN 2.0’ iteration of the theory.² Third, it will delimit several points of connection between contemporary GPN approaches and work in IB. These connections suggest the potential for a productive interchange of concepts and ideas between the two fields moving forward.

Context: from GCCs to GPNs

While several detailed accounts of the intellectual development of global chain/network approaches now exist (e.g. Bair, 2005; Sturgeon, 2009; Coe & Yeung, 2015), the bare bones are as follows (see also Table 9.1). The 1994 publication of Gereffi and Korceniewiecz’s edited volume Commodity Chains and Global Capitalism launched a highly influential strand of global commodity chain (GCC) research. Building upon Immanuel Wallerstein’s world-system framework, the analysis proposed GCCs as a new conceptual category for “understanding the changing spatial organization of production and consumption in the contemporary world-economy” (Gereffi, Korzeniewicz & Korzeniewicz, 1994, p. 2). Each global commodity chain was deemed to have four interrelated dimensions. First, the input–output structure identified the various economic activities that come together in a value-adding sequence to deliver a good or service. Second, the territoriality referred to the spatial configuration of the various actors involved, be that in terms of spatial concentration or dispersal, or more likely combinations of the two. Third, each global commodity chain embodied a governance regime reflecting the relations of power and authority within the chain and how they shaped the flows of materials, capital, technology and knowledge therein; in this regard, Gereffi’s (1994) seminal distinction between ‘producer-driven’ and ‘buyer-driven’ commodity chains has subsequently been particularly influential. Fourth, GCCs are reflective of the wider institutional frameworks that surround them, and particularly state and supra-state policies and regulations in domains such as trade, investment and technology.

Although GCC work still continues today, in many ways it has been superseded by the emergence of the global value chains (GVC) perspective from the early 2000s onwards. Central to this initiative has been a concerted attempt to deepen the theorization of inter-firm governance. Most notably, by intersecting the three supply chain variables of complexity of transactions, the ability to codify transactions and the capabilities within the supply base, Gereffi, Humphrey and Sturgeon (2005) develop a five-fold typology of governance within GVCs. In addition to the pure forms of market and hierarchy, they identify modular, relational and captive forms of governance that rely on intermediate levels of coordination and control. More recent work has focused on the different modes and levels of governance operating within GVCs, distinguishing between overall drivenness (the GCC distinction between buyer or producer driven), different forms of coordination (the five types just noted), and the wider ‘normalization’ processes that operate along the chain (Ponte & Sturgeon, 2014). Two other important developments within the GVC literature relate to how sub-national spaces (e.g. clusters) ‘plug-in’ to global value chains (Humphrey & Schmitz, 2002), and how firms and localities can subsequently improve their position within such chains over time in a process commonly known as upgrading (Kaplinsky & Morris, 2001).

GCC research and early GVC work were clearly important inspirations for the development of the initial GPN framework in Economic Geography (here termed ‘GPN 1.0’) in the early 2000s (see Table 9.1). GPN 1.0 emphasizes the complex intra-, inter-, and extra-firm networks involved in any economic activity, and how these are structured both organizationally and geographically. In addition to similar impulses to those that were driving the shift from GCC to GVC analyses at that time – most notably the desire for more nuanced understandings of governance dynamics and more thorough incorporation of multiple scales of analysis beyond the global and the national – the GPN approach differs more profoundly in other aspects. Inspiration was drawn, for instance, from actor-network theory in terms of its conceptualization of social systems as complex networks of power relations with emergent properties, and the varieties of capitalism literature with respect to how different institutional configurations leave a distinctive imprint on firms that originate from, and/or are located in, particular national territories.

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Hence, from the outset, GPN analysis sought to distinguish itself from GCC and GVC approaches in several key regards. First, through the explicit consideration of extra-firm networks, it necessarily brings into view the broad range of extra-firm institutions – for example, supranational organizations, government agencies, trade unions, employer associations, NGOs and consumer groups – that have the potential to shape firm activities in the locations that are connected by GPNs. In this way, it seeks to move beyond the prioritization of inter-firm networks in GCC/GVC accounts, and brings extra-firm actors into GPNs, rather than simply seeing them as part of the wider context. Second, GPN analysis is innately multi-scalar, and considers the interactions and mutual constitution of all spatial scales from the local to the global. Third, it is an avowedly network approach that seeks to move beyond the analytical limitations of the chain notion. Production systems are seen as networked and recursive meshes of intersecting vertical and horizontal connections in order to avoid deterministic linear interpretations of how production systems operate and how value is generated and distributed.

The mobilization of the GPN framework, in turn, depends on the operationalization of three interrelated variables. First, processes of value creation, enhancement and capture are scrutinized. Value is seen to derive from the rents of different kinds that firms can extract from their position within the wider GPN. Firms specialize in particular kinds of rents, and the nature of economic value will thus vary across the production network. While it is possible to think dynamically about the potential for value enhancement through firm-to-firm processes of knowledge and technology transfer, and industrial upgrading, ultimately it is important to consider which firms and which locations succeed in capturing value. Second, the distribution and operation of power of different forms within GPNs is considered. In GPN analysis, power is seen as relational, transaction specific and co-existing with relations of dependency. It can also be mobilized in GPNs not just by corporate actors, but by institutions such as the state and collective actors such as labour. Third, the embeddedness of GPNs – or how they constitute and are re-constituted by the ongoing economic, social and political arrangements of the places they inhabit – is investigated. Most notably a distinction between societal, network and territorial forms of embeddedness allows nuanced consideration of the importance of socio-cultural and institutional contexts to all GPN activities.

Another key contribution of GPN 1.0 analysis has been in the theorization of (subnational) regional economic development through the strategic coupling of GPNs with the localized assets of regional economies. GPN analysis suggests that economies of scale and scope embedded within specific regions are only advantageous to those regions, and bring about regional development, insofar as they can complement the strategic needs of lead firms in GPNs. The notion of strategic coupling has three important characteristics: it is strategic in that it needs active intervention on the part of both regional institutions and powerful GPN actors to occur, it is time-space contingent as it is subject to change and represents a temporary coalition between local and non-local actors, and it transcends territorial boundaries as actors from different spatial scales interact. This multi-scalarity also encompasses the activities of the institutional actors that seek to promote regional advantages and enhance a region’s articulation into GPNs. These regional institutions include not only regionally specific institutions, but also local arms of national/supranational bodies (e.g. a trade union’s local chapters), and extra-local institutions that affect activities within the region without necessarily having a presence (e.g. a national tax authority).

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Currents: towards a GPN 2.0?

The original GPN 1.0 framework thus emphasizes the complex firm networks and territorial institutions involved in globalized economic activity, and how these are structured both organizationally and geographically. Indeed, it has proved relatively successful in offering a flexible, geographical heuristic framework for mapping the shifting arrangements of GPNs. Recently, however, there have been attempts to develop a new iteration – GPN 2.0 (see Table 9.1) – with enhanced capacity for causal explanation of the links between GPN configurations and uneven territorial development within the global economy (Coe & Yeung, 2015). This theoretical evolution is underpinned by four interlinked sets of conceptual developments which are considered in the following subsections.

Delimiting GPNs

Oddly, perhaps, given the relative maturity of the literature in this area, there are still challenges and inconsistencies relating to the definition and delimitation of GPNs. More specifically, the tendency to characterize GPN configurations at the industry level (a hallmark of GVC approaches) has important limitations. Instead, we need to understand individual GPNs as lead-firm based configurations. While they will exhibit industry traits, at the same time there will be considerable variation between GPNs even in the same industry or product category, depending on the lead firm’s ownership mode, nationality, corporate culture and strategic disposition. Fuller attention also needs to be ascribed to how GPNs connect with their end users and markets, broadly defined. Many studies tend to identify a lead firm and then work ‘backwards’ or ‘upstream’ to explore inter-firm relationships with suppliers. We should perhaps give as much, if not more, consideration to forward or downstream linkages, first to reveal the networks of distributors, resellers, retailers, etc. that connect lead firms to their markets, and second, to enable consideration of the important recent literature highlighting recycling and the post-consumption ‘after-lives’ of products and services (e.g. Gregson et al., 2010).

Enhanced precision in delimiting these networks will in turn allow us to better conceptualize the intersections between different GPNs in different industries (e.g. the role of finance and logistics firms in the electronics industry or the role of ICT products and services in automobiles, aviation and banking). These cross-cutting connections are not peripheral to the operation of GPNs, but rather are fundamental to the value creation, enhancement and capture dynamics within all of the interconnecting industries. Finally, the complex spatiality of GPNs needs to be more effectively conceptualized. In addition to the often discussed ‘vertical’ dimension of GPNs (i.e. the links across the different nodes in the GPN), appreciation is required of the ‘horizontal territorial interfaces’ that co-constitute the GPN, i.e. the on-the-ground places and patterns of economic development that result from localities ‘plugging in’ to GPNs.

Driving GPNs

The second major imperative in GPN 2.0 is to theorize the underlying political-economic forces that shape the ongoing formation and reconfiguration of GPNs; so doing will help explain contemporary shifts in GPN organization (e.g. responding to the rise of Asia as a vitally important end-market). While there is often implicit or explicit acknowledgement of cost factors in the extant GVC/GPN literatures, there is less consideration of how costs are always traded off against firm capabilities, and of market development and financialization as further drivers of GPN dynamics. A productive way forward in this context is to think of how global lead firms and their suppliers are increasingly confronted with the competitive challenges of optimizing their cost-capability ratios, sustaining market development through, for example, shortening their time-to-market, and working with the immensely disciplining pressures of global finance. These three dynamic forces compel firms and extra-firm actors to develop active strategies in order to thrive in today’s highly competitive global economy.

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To sustain or further their competitive positions, lead firms and their network partners need to optimize cost-capability ratios in recursive ways that reduce costs over time and/or enhance firm-specific capabilities. These dynamics are at the forefront of globalizing industries such as apparel, electronics and automobiles. Over time, optimizing cost-capability ratios may allow lead firms to succeed only in existing markets. In delimiting the market development imperative, GPN 2.0 frames how, irrespective of their cost-capability ratios, global lead firms and their network partners must continually develop new markets for their products and services, whether in advanced economies or in newly emerging economies. This market-making highlights the causal importance of the intermediate and final consumption of goods and services in the geographical dispersion of their production and distribution. In so doing, it affords greater analytical weight to customers and their consumption in shaping how economic and non-economic actors orchestrate or participate in different GPNs.

As global financial integration takes place in tandem with global production, a third dynamic of financial discipline, often under-played in the existing literature (although see Milberg & Winkler, 2013), places great emphasis on short-term returns to shareholders and corporate restructuring and downsizing to increase shareholder value. This process of ‘financializing’ lead firms in manufacturing and non-financial service industries has profound impacts on the corporate organization and governance of GPNs. Coupled with the first two dynamic forces, financialization exerts enormous pressures on lead firms to optimize cost-capability ratios and to capture more value from new markets. More importantly, it incentivizes these lead firms to seek greater shareholder returns through investment not in new plants and equipment, but in financial assets that may not be related to these firms’ core products or services. Investment decisions by lead firms are thus often trumped by short-term financial returns rather than longer-term synergies in production and market development arising from product and/or technological complementarities.

Bringing together these dynamics provides vital purchase on why GPNs emerge and evolve. But such analysis needs to be augmented with nuanced consideration of the diverse and substantial risks associated with global production. As global leading firms engage more in international outsourcing and as their foreign partners and suppliers actively develop their own firm-specific capabilities, all the firms are confronted with an operating environment that is much less certain and predictable than their home economies and domestic markets. Some of these uncertainties can be calculated and translated into different forms of risk specific to GPNs (e.g. economic, product, regulatory, labour and environmental risks). Mitigating these risks not only forces firms to develop specific strategies (see next subsection), but also necessitates the involvement of other non-economic actors in these GPNs.

Overall, deepening our understanding of these drivers can underpin development of an evolutionary approach to GPNs that foregrounds the factors underpinning (a) their initial formation and (b) their subsequent reconfigurations (both dimensions will vary considerably across firms, sectors, geographies and time periods). Oddly, many studies in the GVC/GPN genre seemingly take the initial formation of GPNs as a given, preferring to investigate their internal dynamics only in the post-establishment phase. The challenge here is to chart the shifting intersections of (or episodic shifts in) dynamics of technological change, market development, financialization and risk mitigation in shaping the formation and development of GPNs.

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Developing GPNs

Third, GPN 2.0 advocates a clear focus on actor strategies. In short, strategy matters in analysing the diverse actor practices and network configurations that result from the intersecting drivers outlined earlier. Considering strategy reveals actor intentionality and agency, reducing the potential for simply ‘reading off’ firm actions in relation to their role and position in relation to wider sectoral or industrial organizational configurations. Actors tend to adopt multiple strategies to cope with different configurations of competitive dynamics and risk environments. By mapping the dynamics and risks of GPNs onto the strategic choices employed by different network actors, it is possible to demonstrate that not only are there diverse possible trajectories for competitive success in global industries, but also that this multiplicity of strategic choices and network configurations defies simple characterization (see Table 9.2).

More specifically it is possible to discern firm- and industry-specificities in the operationalization of four strategies in singular or combinatorial forms: intra-firm coordination, inter-firm control, inter-firm partnership and extra-firm bargaining. Intra-firm coordination tends to be deployed by firms subject to strong market imperatives and high levels of risk. Their network configurations are likely to be internalized through domestic expansion, FDI and M&As. On the contrary, firms under pressure from high cost-capability ratios and financial discipline are likely to engage in inter-firm control through production outsourcing and dependent integration of suppliers into their GPNs. In this mode of externalization, an inter-firm partnership relationship can be developed if firms enjoy significant complementarities and mutual dependency in the context of highly competitive market dynamics and risky environments. Similar competitive and risk environments may also compel firms to enter into bargaining relationships with extra-firm actors in order to extract greater value from their GPNs.

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While for analytical purposes it is useful to disentangle the four different types of strategy, the reality for many firms is that they are usually actively combining two or more such strategies across their various operations and activities. Global retailers, for instance, in different ways combine internalized store operations with strong control over myriad small- and medium-sized suppliers, partnership-style arrangements with large brand suppliers and logistics providers, and the ongoing management of multi-stranded extra-firm relations, for instance with planners and regulators in local and national government. Such an approach, then, is underpinned by recognition of the importance of variability in understanding how firms, originating from different home economies and endowed with different ownership structures and corporate cultures, might respond differently to competitive dynamics and risks, thereby pursuing contrasting firm-specific strategies in configuring their GPNs.

Depending on GPNs

Finally, GPN 2.0 seeks to further understand the development and dependency outcomes for the places that are connected into GPNs. Although highly productive in many ways, recent debates have revealed potential limitations within the prevailing upgrading approach (e.g. Tokatli, 2013). Instead it might be more productive to think in terms of the many different value capture trajectories that can result when a firm in a particular locality connects into a GPN (including instances of decoupling, recoupling and shifting between different networks). This approach allows consideration of the multiple possible outcomes – both positive and negative – in dynamic and evolutionary terms of such intersections, and reflects the multiple roles that a single firm may perform in a wider network. Regional economic development can then be thought of as powerfully shaped by the aggregation of these firm-level value capture trajectories.

In turn, the aforementioned notion of strategic coupling can be further developed to delimit the different ways in which regional economies intersect with GPNs. We can think in terms of different modes (e.g. indigenous, functional and structural coupling) and types (e.g. innovation hubs, logistics hubs, assembly platforms, etc.) of strategic coupling which reflect how certain kinds of value capture trajectories and couplings often come to dominate at the regional level. While individual regions may exhibit more than one type of coupling, straddling different modes is much less common. These different modes, in turn, underpin economic development due to their variable potential for value capture, their different configurations of control and dependency, and their different susceptibilities to decoupling. Importantly, strategic coupling must always be framed in dynamic terms (i.e. decoupling and recoupling) and as driving both positive and negative economic developmental outcomes.

This enhanced notion of strategic coupling also provides a way into thinking about the wider political contexts in which GPNs are incontrovertibly embedded – these are often obscured by the predominant focus on inter-firm relations in existing research. GPNs necessarily involve control of and struggle over power, resources and value on an ongoing basis (Levy, 2008). In other words, the ‘extra-firm’ or ‘institutional’ dimensions of GPNs need to be taken seriously. In addition to the multi-level state (e.g. international organizations and local authorities), the other key categories of non-firm actor are labour, civil society organizations, industry associations, consumers and standards-setting agencies (the latter may overlap with some or all of the former categories). By foregrounding notions of control, power, struggle, rivalry and contestation over value and its distribution, the constitutive role of such actors in GPNs can be revealed. Such insights are vital for better theorization of the development implications of ‘plugging in’ to GPNs, for instance in terms of the distribution of value between production network participants, and beyond the network to other actors in the regional economy.

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Connections: productive points of exchange

Thus far, the chapter has positioned GPN research and introduced current areas of debate and theoretical development within the field. This section moves on to discuss potential points of connection between the research agenda described earlier and contemporary concerns in IB. In making such an assessment, it is important to note that both fields are rapidly evolving, and static characterizations must be avoided. Nonetheless, it remains fair to say that direct engagements between the two literatures have hitherto been rather sparse (although see Beugelsdijk, Pedersen & Petersen, 2009; Narula & Dunning, 2010).³ In general terms, as de Marchi, di Maria and Ponte (2014) note, GVC/GPN analysis poses several broad challenges to IB research with respect to: (1) appreciating the significance of the shift from individual firms to production networks as the key unit of analysis; (2) the rise of retailers and buyers as lead firms in addition to the well-studied manufacturing firms; (3) increasingly fine-grained analysis of modes of production network governance; and (4) the recognition that knowledge flows along production networks can be as important as those within TNCs. In short, as de Marchi, di Maria and Ponte (2014, p. 465) assert, “decisions on how to manage the value chain the MNC is embedded in are becoming as strategic as those concerning the internal configuration of the MNC, between HQ and subunits”.

That being said, there has been increasing engagement with the idea of global production fragmentation in the IB literature, most notably through Buckley’s notion of the ‘world factory’ created by the outsourcing of routine activities by advanced economy TNCs (e.g. Buckley & Ghauri, 2004; Buckley, 2009; Buckley & Strange, 2015). Buckley and Strange (2015), for instance, engage in direct dialogue with Gereffi’s GVC work. Other studies have looked at the role of leading TNCs as network ‘orchestrators’ or ‘coordinators’ (Parkhe & Dhanaraj, 2003; Vahlne & Johanson, 2013). However, these approaches still tend to underestimate the degree of production fragmentation and the sophistication of the tasks that are coordinated through GPNs, and complex non-equity forms of control and coordination continue to be downplayed in relation to the internal hierarchies of TNCs. Other IB work has looked at the outsourcing/offshoring decision-making nexus in TNCs as a force driving the formation of GPNs, with routine tasks (including manufacturing) being identified as candidates for externalization and with knowledge-based activities being retained in-house (e.g. Mudambi, 2008; Mudambi & Venzin, 2010). In a nuanced analysis, for instance, Contractor et al. (2010) conceptualize how a firm’s core competence lies in the ability to optimize its degree of value chain disaggregation, the mix of internal, alliance-based and contractual modes therein, the geographic spread of operations and the chronological coordination of distributed tasks. In a general sense, then, it is not hard to see how the concerns of the GPN and IB literatures can be brought together.

Beyond these general convergences, however, there are some more specific areas that offer potential for the co-development of ideas between GPN 2.0 analysis and IB. Four interrelated themes will be identified here, though the list is not meant to be exhaustive. First, as noted earlier, in GPN 2.0 the market imperative is seen as one of three under-studied dynamics driving processes of GPN formation and reconfiguration. In particular, the rise of new markets in emerging economies is proving transformative, and has implications both for lead firms from advanced economies looking to access these markets, and in the formation of new lead firms within emerging economies that may subsequently look to ‘go global’. These ideas resonate clearly with recent work in IB by Brandt and Thun (2010, 2016), for instance. Through research on the automobile, construction and machine tool industries in China, they note how the ‘low-end’ of the large domestic market is dominated by domestic firms whose ability to operate cheaply insulates them from foreign competition, “allowing the more capable domestic firms to gain from scale, experience, and revenue vital to upgrading efforts and shifts to higher end segments” (Brandt & Thun, 2010, p. 1571). Emerging market firms that view their home territory as an important market may in turn engage with suppliers from developed economies in ways that challenge existing understandings of inter-firm governance modes (Sako & Zylberberg, 2015). At the same time, rapid growth in the ‘low-end’ segments is encouraging foreign lead firms to localize their design activities and sourcing patterns for both components and capital equipment. As Thun (2015, p. 2) aptly describes,

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[t]he growth of large emerging markets means that the endpoints of many GVCs are now in developing countries rather than developed, and as a result, different rules of the game apply. In buyer-driven chains, the emerging market firms will have the more nuanced understanding of what consumers want; in producer-driven chains, the technologies that are demanded are more likely to be within the range of emerging market firm’s capabilities . . . the competitive dynamics of the “fight for the middle” are very different than traditional competition for the most technologically-demanding segments.

A second area of common interest relates to corporate strategy. Long a core concern in IB, GPN 2.0 attempts to enhance interest in the various corporate strategies that firms in GPNs pursue in response to competitive drivers. An obvious point here is that in re-opening the ‘black-box’ of the firm in order to understand these strategies, GPN research may learn from the IB literature in terms of characterizing different types of global strategic action. A perhaps more important insight, however, is that the different modes of governance identified in GVC analysis are as much an outcome of firm strategies as they are a shaper of those strategies. Such a view accords with work in IB suggesting that “firm-level strategy is not just about positioning the firm within an existing global value chain with a pre-determined governance mode, but also about configuring governance modes in line with the company’s strategic goals” (Sako & Zylberberg, 2015, pp. 20–21, emphasis in original). Firms have considerable choice in terms of the governance forms they select, the markets they serve and their geographical configuration, and these choices need to be seen in the context of wider GPN structures, but as not necessarily driven by those structures (Thun, 2015). An area of common interest would thereby be to further explore the ‘make or buy’ decision, and the strategic considerations behind that, and how these decisions in turn create certain governance outcomes in GPNs, rather than the other way around. Importantly, this should apply not just to lead firms, but also other influential actors such as global suppliers (Azmeh & Nadvi, 2014), strategic partners and specialized service providers. Furthermore, as GPN 2.0 argues, the expectation should be of significant variation in, and complex combinations of, strategies across different firms, sectors and territories. As Sako and Zylberberg (2015, p. 23) note, firms “have a menu of strategic options to choose from, resulting in more than one potentially successful strategy in each sector for shifting governance mode and capturing more power”.

Relatedly, a third area of potential symbiosis concerns the dynamics of value capture. In GPN 2.0, firm-level value capture dynamics are seen to be fundamental to processes of territorial economic development. Firms will strategize to maximize the level of capture, and their ability to do so effectively will depend on a number of broader influences: firm-level capabilities (e.g. managerial expertise, capacity to raise financial capital), GPN-level influences (e.g. the configuration of power relations between network members, the ease with which the role of the firm can be substituted), industry specificities (e.g. growing or stagnant market, level of cost competition), but also territorialized conditions (e.g. the extent to which activities are supported and facilitated by local policy and incentive structures) (Coe & Yeung, 2015). For de Marchi, di Maria and Ponte (2014), GVC/GPN analysis has the potential to reveal the importance of GPN dynamics in particular for shaping learning and value dynamics among suppliers, who may evolve autonomously or through lead firm investment. In this context, processes of value creation and enhancement need to be disentangled from those of value capture. Two points of connection with the IB literature are apparent here. While theoretically rich, GPN analysis has thus far struggled to actually quantify levels of value capture within GPNs. The seminal work of Dedrick, Kraemer and Linden (2010) on “who benefits from innovation” in consumer electronics is therefore instructive in this regard. In turn, Sako and Zylberberg (2015) suggest that Teece’s (1986) “profiting from innovation” framework might usefully be brought to bear on GPN dynamics. With a focus on three sets of factors – the ‘appropriability regime’ (barriers to imitation, both technological and legal), the nature of technological evolution (whether cutting edge or standardized) and the nature of complementary assets (e.g. distribution channels and reverse logistics) – Teece provides ways of thinking about whether firm-level upgrading processes translate into value capture dynamics (see also Jacobides, Knudsen & Augier, 2006). When combined with the focus on firm strategy alluded to earlier, productive synergies with GPN approaches might be forged in this regard.

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Finally, the complex geographies of GPNs would merit further examination from both perspectives. As one would expect from a framework emanating from geography, GPN theory currently has a more refined appreciation of those geographies – as noted earlier, GPN 2.0 makes a distinction between the vertical and horizontal dimensions to such networks, revealing not just the inter-place connections (vertical) but also the on-the-ground territorialities (horizontal) that constitute GPNs. These two dimensions, of course, are interdependent, with the lines of influence running in both directions at the network/territory interface. IB, by contrast, has hitherto tended to have a more impoverished spatial imagination in this context, with geography largely being interpreted as either ‘locations’ in Cartesian space or within contrasting national ‘places’ (e.g. Dunning, 1998; Beugelsdijk, McCann & Mudambi, 2010). The primacy of the national scale when accounting for spatial difference can also be seen in debates on the embeddedness of TNCs (e.g. Meyer, Mudambi & Narula, 2011). Two sets of refinements are required in this regard. First, IB approaches need to adopt a more nuanced spatial vocabulary which takes into account the full gamut of spatial scales. Taking the subnational regional scale seriously is particularly important. Beugelsdijk and Mudambi (2013, p. 421) have made a recent move in this direction within IB:

[b]y defining a three-dimensional framework of place (localized agglomerations of economic activity), space (incorporating both smooth changes in variety as well as qualitative discontinuities) and organization (the activities of firms). Firms organize resources from places and integrate them across space in order to create value.

Key here is the recognition that what they term “subnational spatial heterogeneity” is a driver of firm strategy, and that TNCs choose to locate in particular agglomerations and not in a national territory in general. In turn, the urban and regional development implications of TNC activity can then be more effectively assessed, offering a clear point of connection to the work on strategic coupling in GPN analysis (see Yeung, 2009, for more). Second, geography needs to be incorporated in a more active sense in terms of territorial influences on firm strategies and governance modes in both home and host contexts. In other words, the inherent institutional diversity associated with GPNs needs to be brought to the fore. While Sako and Zylberberg’s (2015) invocation of the causal properties of institutional distance is a step forward, it still equates institutional variation with the national scale (see also Peng, Wang & Jiang, 2008) rather than seeing institutions as multi-scalar and also potentially transnational in constitution.

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Coda: deepening the dialogue

This chapter has served two main purposes. First, for readers less familiar with the field, it has sought to provide a cogent introduction to GPN research both by charting its intellectual lineage and by profiling current theoretical concerns and debates under the auspices of a move to a ‘GPN 2.0’ version. Second, it has identified potential contact points between contemporary GPN research and work in IB. Although meaningful dialogue has largely been noticeable by its absence thus far, this has the potential to be a lively trading zone, and an enhanced two-way conversation between the fields would seem to have considerable merit. From an IB perspective, the GPN literature offers a broad range of insights that will enable the contemporary TNC to be placed more effectively in its fragmented and multi-scalar organizational and institutional contexts. Importantly, a more sophisticated appreciation of the multiple geographies of GPNs (and their constituent actors) will need to be developed in this regard. From a GPN perspective, the IB literature offers ways of ‘opening up’ the black box of the many different kinds of TNCs enrolled into GPNs as strategic actors and for thinking about the processes underpinning value capture trajectories. As GPN research has shown, however, this must go beyond focusing on developed country lead firms to encompass lead firms from many different settings, and also to look at other segments of GPNs that are increasingly dominated by transnational capital (e.g. global suppliers).

Notes

1    In this chapter, for clarity I use the acronym “GPN” to denote theory or literature, and “global production networks” to refer to the empirical phenomenon. The same distinction applies to “GCC” and “global commodity chains”, and “GVC” and “global value chains”.

2    This second section draws on ideas and materials developed at greater length in Coe and Yeung (2015).

3    Sako and Zylberberg (2015) provide a bibliometric analysis that demonstrates this general lack of exchange, albeit framed in terms of a very narrowly defined GVC literature.

References

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