Upstream Control and Downstream Liberty of Action?

Abstract

This article deals with the issue whether the ambition by foreign TNCs to secure quality control, technology and knowledge exclusiveness, cost efficiency and delivery terms among its host country suppliers leads to a strategy to tie up the suppliers to a forced dependence on their customers. It is often assumed that the need by foreign TNCs to secure upstream control in the host country will lead to putting pressure on its local suppliers to limit contacts with competing clients and to become the dominant customer. Our empirical studies among Swedish TNCs, in Brazil, China, India, Mexico, Thailand, Indonesia, and Vietnam, show instead that the normal pattern was not to become the dominant client among its local suppliers. Rather than resulting in ‘captive’ governance structures, our findings suggest that in these types of value chains, ‘developmental’ buyer–supplier relations are likely, resulting in technological upgrading of less capable, domestic suppliers.