Greening the value chain: building competitive advantage through sustainability.

Type de publication:

Conference Paper


Gerpisa colloquium, Berlin (2010)


In this paper we present the conceptual infrastructure of a recently launched research project that seeks to examine the relationship between global value chain governance type and the transmission and implementation of sustainable business practices in the auto sector. A key aim of this project is to identify how firms may develop competitive advantages through the implementation of sustainable business practices and the extent to which the capacity to do so is determined by governance type.

While the recent financial and economic crisis may have raised deeper philosophical questions on the nature of capitalism, more pressing concerns about the impact of rapid economic development in emerging economies and the implications of the world’s warming climate has meant that the issue of sustainability has in recent years gained rapid and mainstream prominence in our discourse. While interpretations of sustainability differ among various actors, clear examples of the ways in which competitive advantages are built through, say, the reduction or elimination of waste within a production process may be more universally understood. Increasingly firms have sought to move beyond sometimes vague or token pledges found in annual reports and marketing materials to incorporate the concept of sustainability at the core of their operations. At the same time the continued expansion of global production networks and the accompanying reconfiguration of supply chains raise questions about the ability of firms to transfer and diffuse sustainable business practices. As the globalization of production has deepened inter-, and intra-firm governance has become an increasingly important issue. Outsourcing has meant that direct managerial control of suppliers within a vertically integrated firm has been replaced with indirect control through value chain governance. Moreover, increasing public awareness of environmental and labour issues and the tightening of national or supranational regulatory regimes have required lead firms to pay closer attention to their suppliers as it is no longer acceptable to claim ignorance of their activities.

While these are challenges for all firms that operate transnationally, they are of particular relevance to the auto sector given the industry’s characteristics and trends which include its environmental impact, the search for alternative technologies, the need for scale economies and the growing importance of markets in emerging economies. Although the challenges may be the same, firms will respond in different ways. A recent report[i] on the sustainability performance of 17 leading auto manufacturers, for instance, suggests that Asian firms outperform their North American and European peers in terms of using their environmental resources more efficiently and thus more sustainably. The issue of how firms coordinate and govern their production networks and value chains is thus becoming a central topic of investigation.

Accordingly, this paper seeks to develop our understanding of the link between various models of value chain governance and the adoption of sustainable business practices in the auto sector. This paper is informed by the concept of the global value chain (GVC) (Gereffi, et al 2009; Henderson et al, 2002; Sturgeon, 2001) and in particular its concern with governance structures (Gereffi et al, 2005; Sturgeon, 2009). GVC analysis emerged in an attempt to both map the geographical distribution and complexity of contemporary global production and grasp the implications of this for state and non-state actors, often in terms of economic development. GVC governance analysis seeks to examine the dynamic relationships that emerge between firms within the chain and the ability of the lead firm (either a buyer or supplier) to control and/or coordinate the activities of other firms. Gereffi (2005) identifies five key types of value chain governance structures that lie on a continuum from a low degree of explicit coordination and power asymmetry (market based governance) through relational suppliers (e.g. the Japanese keiretsu) to the integrated firm where the degrees of explicit coordination and power asymmetry are high. This conceptual framework has been an important tool in mapping the generation, transfer and diffusion of knowledge, technology and innovation between firms and this has been of particular relevance to governments in developing economies that have sought to utilize the presence of lead firms for economic development through industrial upgrading. The governance of these inter-firm relationships determines opportunities for technology transfer (the much sought after ‘spill over’ effect) and hence industrial upgrading.

Cognizant of this we posit that GVC governance analysis may also be applied to examine the generation, transmission and diffusion of sustainable business practices in the auto sector. Further, we seek to gauge the extent to which the ability to implement sustainable business practices is determined by the type of GVC governance employed. We first identify and construct the conceptual framework underpinning this work as outlined above. Attention then turns to consider the case of the auto sector where we identify competing types of governance structures and examples of sustainable business practices. We then analyze these structures with reference to sustainable business practices in an attempt to determine the relevance, or otherwise, of governance type.

[i] Sustainable Value in Automobile Manufacturing: An analysis of the sustainability performance of automobile manufacturers worldwide, 2009, second edition, Sustainable Value Research Ltd., available at accessed February 12th 2009.


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