Abstract
Purpose - This paper aims to examine the relationship between economic upgrading (implementing higher value-added activities) and social upgrading (improvements in workers' rights and employment) of supplier firms in global value chains (GVCs) governed by multinational enterprises (MNEs). This paper answers Buckley and Ghauri's (2004) and Buckley and Strange (2015) calls to incorporate other theoretical approaches within the international business (IB) literature. Furthermore, the paper also responds to Lee and Gereffi (2015) argument, published in Critical perspectives on international business, of the need to incorporate the social impact of upgrading in the IB literature.
Design/methodology/approach - Semi-structured interviews were undertaken with representatives from five supplier firms each in Bangladesh and Sri Lanka, as well as with industry representatives.
Findings - Governance patterns within GVCs can create the conditions for economic upgrading leading to social upgrading achievements. Institutional factors also affect the conditions for social upgrading. Although moving to higher value-added activities is critical for supplier firms, this does not necessarily lead to social upgrading. This paper's research findings suggest that the combination of economic and social upgrading is positively associated with suppliers manufacturing high value-added products and operating in relational networks. In contrast, economic upgrading, by itself, was limited to those firms manufacturing low value-added products, typically those in captive networks.
Originality value - This research is among an emerging body of literature seeking to integrate the GVC literature with the IB field. Importantly, it also contributes to the GVC literature by providing insight into an under-theorized aspect - the relationship between social and economic upgrading.