The Role of Power Asymmetry and Institutions in Suppliers Capabilities for Achieving Sustainability in Global Value Chains

The rise of global value chains (GVCs) facilitated a growing number of firms from developing and emerging economies to participate in international business that has resulted in significant economic development in the host countries. Multinational enterprises’ (MNEs) race to the bottom strategies in search of efficiencies coupled with the lack of adequate institutional development in the host countries prompted precarious working conditions and violation of environmental standards leading to consumer boycotts, sanctions and suspensions of bilateral trade agreements underlying GVC activities. Therefore, GVCs’ sustainability has become an intriguing topic for academic research, management practices and government policy making. Different streams of literature (e.g., corporate social responsibility) has almost independently grown to tackle sustainability issues in GVCs. Fragmentation in the literature calls for an integrative perspective to synthesize multidisciplinary literature to theoretically explain the factors stimulating and/or inhibiting GVCs’ sustainability. We draw from resource dependency theory and institutional theory to explain the factors that account for GVCs’ sustainability. Findings of our research suggest that asymmetrical power between MNE buyers and suppliers, suppliers’ resource constraints and weak institutional conditions in supplier countries are the main impediments towards achieving sustainability along MNEs’ supply chain. We propose that institutional frame of the countries hosting GVCs have potential to shift the power dynamics and procrastinations to expedite GVCs’ overall sustainability performance. This finding provides novel insights to the literature and sustainability practices of suppliers and MNEs.