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What lies between market and hierarchy? Insights from internalization theory and global value chain theory

Abstract

In this paper, we suggest that internalization theory might be extended by incorporating complementary insights from GVC theory. More specifically, we argue that internalization theory can explain why lead firms might wish to externalize selected activities, but that it is largely silent on the mechanisms by which those lead firms might exercise control over the resultant externalized relationships with their GVC partners. We advance an explanation linking the choice of control mechanism to two factors: power asymmetries between the lead firms and their GVC partners, and the degree of codifiability of the information to be exchanged in the relationship.

Résumé

Dans cet article, nous proposons d’étendre la théorie de l'internalisation en incorporant les connaissances complémentaires de la théorie de la chaine mondiale de valeur (CMV). Plus précisément, nous considérons que la théorie de l'internalisation peut expliquer pourquoi les entreprises chefs de file peuvent vouloir externaliser certaines activités, mais qu'elle est en grande partie muette sur les mécanismes par lesquels ces entreprises peuvent exercer un contrôle sur les relations externalisées qui en découlent avec leurs partenaires de la CMV. Nous avançons une explication associant le choix du mécanisme de contrôle à deux facteurs : les asymétries de pouvoir entre les entreprises chefs de file et leurs partenaires de la CMV, et le degré de codifiabilité des informations à échanger dans la relation.

Resumen

En este artículo, sugerimos que la teoría de internalización puede ser extendida mediante la incorporación de ideas complementarias de la teoría de cadenas de valor globales (GVC por sus iniciales en inglés). Más específicamente, argumentamos que la teoría de internalización puede explicar por qué las empresas líderes pudieran desear externalizar actividades seleccionadas, pero que en gran medida no se pronuncia en los mecanismos mediante los cuales esas empresas líderes podrían ejercer control sobre sobre las relaciones externalizadas resultantes con los socios de las GVC. Avanzamos una explicación que vincula la elección del mecanismo de control a dos factores: asimetrías de poder entre las empresas líderes y sus socios de las GVC, y el grado de codificabilidad de la información a ser intercambiada en la relación.

Resumo

Neste artigo, sugerimos que a teoria da internalização pode ser ampliada incorporando insights complementares da teoria de cadeia global de valor (GVC). Mais especificamente, argumentamos que a teoria da internalização pode explicar por que as empresas líderes podem querer externalizar selecionadas atividades, mas que a teoria é amplamente omissa sobre os mecanismos pelos quais essas empresas líderes podem exercer controle sobre as resultantes relações externalizadas com seus parceiros GVC. Avançamos uma explicação ligando a escolha do mecanismo de controle a dois fatores: assimetrias de poder entre as empresas líderes e seus parceiros GVC, e o grau de codificabilidade das informações a serem trocadas no relacionamento.

摘要

在本文中, 我们建议通过结合全球价值链(GVC)理论的补充洞见来扩展内部化理论。更具体地说, 我们认为内部化理论可以解释为什么领先公司可能希望将所选择的活动外部化, 但它们在很大程度上默认了这些领先公司可能对其与GVC合作伙伴产生的外部化关系进行控制的机制。我们提出了一个解释, 将控制机制的选择与两个因素联系起来: 领先公司与其GVC合作伙伴之间的权力不对称, 以及在关系中要交换的信息的可编码程度。

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ACKNOWLEDGEMENTS

The authors would like to thank the Editors of this Special Issue for their encouragement and support in the writing of this paper. We would also like to acknowledge the constructive comments made by the anonymous reviewers, and by the participants at the Paper Development Workshop for this Special Issue held in Minneapolis in June 2018. The usual disclaimer applies.

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Correspondence to Roger Strange.

Additional information

Accepted by Rajneesh Narula, Area Editor, 10 September 2018. This article has been with the authors for two revisions.

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Strange, R., Humphrey, J. What lies between market and hierarchy? Insights from internalization theory and global value chain theory. J Int Bus Stud 50, 1401–1413 (2019). https://doi.org/10.1057/s41267-018-0186-0

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Keywords

  • internalization theory
  • global value chain theory
  • externalization
  • outsourcing
  • global factory