Dynamics of Value Chain Governance: Increasing Supplier Competence and Changing Power Relations in the Periphery of Automotive Production—Evidence from Bursa, Turkey

Abstract

Adopting a global value chain (GVC) approach, this paper focuses on the ways in which global automotive transnational corporations coordinate their value chains with suppliers in the periphery of automotive production. In particular, it directs attention to particular forms of chain relations established by lead firms with suppliers in Turkey and the ways in which these chains are coordinated. Findings indicate that as component suppliers in the periphery of automotive production, such as those in Bursa, have gained the competencies not only to manufacture to the cost, quality and flexibility specifications required by their customers but also of design and product development, lead firms in the automotive industry have turned to modular value chains, where competent suppliers provide a range of services with less dependence on their customers, as a way of sourcing from these suppliers. I use this evidence to argue that GVC governance is dynamic and suppliers in the periphery have some room for breaking power asymmetries associated with specific modes of governance in GVCs.

Can the periphery achieve core? The case of the automobile components industry in Spain

“…These initiatives include, among others, aid from the Spanish government to support investment in the modernization and adoption of advanced production systems and the industrialization of new processes as part of the latest Integral Automobile Plan 2009–2010, and the development of technological support infrastructure to train human capital in the acquisition of technological skills linked to production processes and to promote knowledge transfer among technological suppliers and firms (Table ). These results confirm that from the GVC point of view, the evolution of peripheries needs not only to be promoted by firm‐level efforts (Ozatagan ), but also by public institutions, especially through innovation systems (Asheim and Isaksen ; Nelson ).…”

“…It focuses on the change in the periphery in production and R&D activities caused by the development and learning processes fostered in these geographical areas, which lead to new industrial production characteristics and renewed manufacturer‐supplier relationships (Domanski and Gwosdz ; Frigant and Layan ). This evolution is usually promoted by firm‐level efforts (Ozatagan ), and encouraged by public institutions through innovation systems (Lundvall ; Asheim and Isaksen ; Nelson ).…”

“…Depending on the time of expansion in the automobile industry, it is possible to identify different types of periphery (Lung 2004;Layan and Lung 2007): first periphery (Spain and Portugal), second periphery (Eastern Europe), and probably now a third periphery (North Africa). Interest in this has already been aroused, as shown by the appearance of several studies on the determinants of investment in the sector and their effect on national industry in Eastern Europe (Domanski and Gwosdz 2009;Pavlínek et al 2009;Ozatagan 2011); and in countries in North Africa (Layan and Lung 2007). Particularly, the analysis of the components manufacturing industry offers keys to this spatial reorganization of the sectoral GVC, because of its specific weight in production and employment terms and, the strategic relevance it has acquired because of the outsourcing of production and of R&D by automobile manufacturers.…”

Exploring the relationship between upgrading and capturing profits from GVC participation for disadvantaged suppliers in developing countries

“…Ten studies in our sample report functional upgrading for disadvantaged suppliers. Examples include a shift to design functions by Turkish automotive suppliers (Ozatagan, , ), the upgrading of Brazilian footwear and furniture suppliers in product design and marketing functions (Navas‐Alemán, ), the deepening of production capabilities in the Indonesian and Vietnamese motorcycle industries (Fujita, ; Sato, ), and the functional upgrading and downgrading of Eastern European suppliers in the apparel industry (Pickles et al, ), among others.…”

Connecting Local Producers in Developing Countries to Regional and Global Value Chains

“…The cost and availability of skilled human capital is another important factor for upgrading, placing the development of engineering and design skills at the fore . In addition, upgrading in the automotive industry is tied to public commitments to policies that both promote FDI and facilitate innovation among firms Ozatagan, 2011;Sturgeon & Biesebroeck, 2011;Wad, 2009). …”