Power relationships along the value chain: multinational firms, global buyers and performance of local suppliers

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’