A conceptual framework to explain the mechanism and boundary conditions for managing sustainability in global value chains

The rise of global value chains (GVCs) has led to increasing externalisation of multinational enterprises’ (MNEs) international business activities to confer higher efficiencies and competitive advantages. Power asymmetries in MNEs favour coupled with weak institutional quality of supplier countries resulted in tiered production systems that account for precarious working practices and rampant violation of environmental standards in MNE-led GVCs, insinuating consumer resentment and causing reputational damage for both MNEs and supplier countries. In this research, we synthesise network theory, resource-based view of firm competitiveness and institutional theory to explain the mechanism and boundary conditions for achieving desired level of sustainability in GVCs. Findings of our research reveal that power imbalance between GVC buyer and suppliers, resource constraints of the suppliers and weak institutional conditions in supplier countries are the main impediments towards achieving sustainability along MNEs’ supply chain. We propose that institutional actors of countries hosting GVCs can shift the power imbalance between buyers and suppliers to expedite GVCs’ overall sustainability performance. This finding casts new lights on policy making and practices.