Enabling SMEs' Learning from Global Value Chains: Linking the Logic of Power and the Logic of Embeddedness of Interfirm Relations.

VerfasserSoontornthum, Thanyaporn

1 Introduction

With resource restrictions, small-and-medium-sized enterprises (SMEs) are typically specialized, as opposed to vertically integrated, business organizations that focus their resources on a limited range of value-adding activities (Musteen et al. 2017). To achieve optimal performance, SMEs need to form exchange relationships with upstream and downstream partners. With the on-going trend of business globalization, supply chains are increasingly formed across national borders and SMEs are becoming participants in global value chains (GVC) (Buckley and Tian 2017). By participating in GVC, SMEs form international linkages which can be potentially leveraged as valuable learning sources.

GVC entail vertical linkages incorporating various production stages across firms in different country locations (Mudambi 2008). Researchers argue that GVC are platforms for knowledge flow and interfirm collaboration, and therefore can be an important source of learning for SMEs (Alcacer and Oxley 2014; Saliola and Zanfei 2009). A growing body of research concerns how firms can realize learning from GVC linkages (Schmitz 2006; Schmitz and Knorringa 2000), rather than being constrained by the interdependence on such linkages (Cuervo-Cazurra and Rui 2017). Research so far has yet to generate an understanding of what factors enable SMEs to realize learning from their dependence on GVC. By tackling this research question, our study contributes to enhancing the understanding of interdependent relationships in GVC, offering strategic and practical implications for firms, especially SMEs, seeking to leverage the learning opportunities from international linkages (Mathews 2006, 2017).

Theoretically, our study draws on the logic of power and logic of embeddedness in existing research on interfirm relations (Andersson et al. 2001, 2002; Gulati et al.2000; Gulati and Sytch 2007; Uzzi 1996, 1997) and extends them to the context of the GVC. We conceptualize SMEs' GVC dependence as interorganizational +knowledge. These relationships involve asymmetric power between exchange partners based on their interdependence, and can vary in the degree of embeddedness--from a purely arm's-length transactional relationship to a longlasting relationship with mutual trust and commitment (Uzzi 1996, 1997). The logic of power explains the responses of the firms to power asymmetry in interfirm relations (Casciaro and Piskorski 2005; Gulati and Sytch 2007). Responses in the form of relationship-specific investment create relational embeddedness in interfirm relations (Andersson et al. 2001, 2002); its consequence on information exchange and interorganizational learning is explained by the logic of embeddedness (Gulati and Sytch 2007; Lane and Lubatkin 1998; Uzzi 1996).

In this study, we advance existing knowledge by linking the logic of power and the logic of embeddedness and applying them to the context of SMEs' learning in GVC. We identify technical adaptation of SMEs in the GVC, a particular type of relationship-specific investment, as both a response to their dependence on the GVC following the logic of power and an action that creates relational embeddedness following the logic of embeddedness. Such relational embeddedness subsequently leads to heightened information exchange and interorganizational learning at the dyad level. Accordingly, we hypothesize that the technical adaptation of an SME mediates the relationship between its GVC dependence and the knowledge transfer it receives. Furthermore, this mediating role is stronger for SMEs having a longer history of transactional relationship with GVC partners which amplifies the logic of power, and SMEs possessing a higher level of financial slack which strengthens the logic of embeddedness. In other words, the historical and financial positions of SMEs moderate the mediated relationship between GVC dependence and knowledge transfer via technical adaptation.

Empirically, we test the hypothesized moderated mediation relationships in the context of Thai SME manufacturing firms' participation in the GVC. Thai SMEs have been historically active in participating in GVC, typically serving as original equipment manufacturers and interim product suppliers for more established foreign firms. We collected multi-respondent survey data from 292 Thai manufacturing firms partaking in GVC. Structural equation modelling (SEM) approach was employed to establish convergent and discriminant validity. PROCESS macro for SPSS was utilized to (1) estimate each mediated path and its moderator in the model at the same time and (2) obtain 95% bias-corrected bootstrapped confidence interval. Our data analyses rendered strong support for the mediating role of technical adaptation in the relationship between GVC dependence of Thai SMEs and the knowledge transfer they received, and for the positive moderating effects of historical position and financial slack on the first and second stage of the mediation path respectively. These results are robust against alternative measure, sample, and analysis method.

The rest of the paper is organized as following. We first discus the theoretical foundation of the current study, incorporating the logic of power and logic of embeddedness as the guiding framework for the development of our three research hypotheses. We then provided extensive information on the research context (i.e., Thai SMEs in GVC) and research method (i.e., multi-sourced survey). This is followed by the results of our hypothesis testing, including additional analyses to test for the robustness of the research results. The paper concludes with a highlight of our theoretical contribution, practical implications for international management professionals, limitations of the current study, and future research directions.

2 Theory and Hypotheses

2.1 Two Dominant Logics of Interfirm Relations

Research on interfirm relations aims to understand interorganizational behaviors and their impact on the performance of the firms (Casciaro and Piskorski 2005; Gulati and Sytch 2007; Uzzi 1996). Its basic premise is that firms are embedded in social networks with other actors, and because individual firms rarely possess all the resources required for their survival and development, they are interdependent on each other for these vital resources (Pfeffer and Salancik 2003). There are two main arguments regarding the implications of the interdependence of the firms.

One argument is the logic of power, arguing power comes from the control of vital resources (Ulrich and Barney 1984) not necessarily distributed between interdependent firms in an equal manner. Power imbalance emerges from dependence asymmetry, which is likely to be detrimental for the weaker actor whose action is constrained by the stronger actor. This line of argument is the core of the resource dependence theory, highlighting organizational tactics and interfirm organizational arrangements as consequences of interdependence of firms, whereby power disadvantaged firms redress power imbalance and/or absorb external constraints (Casciaro and Piskorski 2005; Hillman et al. 2009). Essentially, the logic of power addresses the transactional aspect of interfirm relations.

The other argument centers on the logic of embeddedness. Instead of focusing on the power dynamics between interdependent firms, this argument recognizes relational embeddedness as an alternative logic of action, whereby firms increase their commitment to their relationships over time, changing the characteristic of their exchange relationships from arm's-length transaction toward adaptation and trust, resulting in mutual benefits to the interdependent firms (Uzzi 1996, 1997). Following this argument, interdependent firms are motivated to develop relational embeddedness as a strategic resource, by undertaking actions serving the strategic and/or performance objectives specific to their exchange relationships (Andersson et al. 2001, 2002; Gulati and Sytch 2007). Overall, the logic embeddedness focuses on the relational aspect of interfirm relations.

The logic of power and the logic of embeddedness are not competing arguments. Prior studies have applied these logics to address different (transactional vs. relational) aspects of the interdependence phenomenon (e.g., Gulati and Sytch 2007). We argue that these logics can be linked in a consistent chain of perspectives; that is, the logic of power explains the motivation for firms to make relationship-specific investment as a response to power imbalance emerging from high levels of interdependence on exchange partners, while the logics of embeddedness corroborates the consequence of such relationship-specific investment on information exchange and interorganizational learning with their partners. In this sense, relationship-specific investment serves as a mediator channeling the effect of interdependence on interorganizational learning. The type of relationship-specific investment most salient to an exchange relationship is necessarily context-specific. In this study, we identify technical adaptation as a relationship-specific investment in the context of SMEs' participation in the GVC. Below, we develop research hypotheses regarding the mediating role of technical adaptation in transmitting the learning outcome of SMEs from their GVC dependence, as well as the contingency factors of this mediating relationship.

2.2 Technical Adaptation as a Relationship-Specific Investment in the GVC Context

Technical adaption refers to the action of adapting a firm's product, production process, and related internal routines and systems (Andersson et al. 2001, 2002). In the GVC context, technical adaption is a relationship-specific investment allowing partner firms to coordinate the dispersed value chain of global production through product and process standardization and routinized interfaces between value chain partners (Nadvi 2008). While GVC dependence serves as...

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