Globalization and the Value Chain

BRQ Business Research Quarterly (2017) 20, 137---150 www.elsevier.es/brq BRQ Business Research Quarterly REVIEW ESSAY Global value chain conﬁguration: A review and research agenda Virginia Hernández a,∗, Torben Pedersen b aUniversity Carlos III of Madrid, Business Management Division, C/ Madrid, 126, 28903 Getafe, Madrid, Spain bBocconi University, Department of Management and Technology, Via Roentgen 1, 20136 Milan, Italy Received 28 November 2015; accepted 29 November 2016 Available online 23 January 2017 JEL CLASSIFICATION M16 KEYWORDS Literature review; Global value chain; International business; GVC conﬁguration Abstract This paper reviews the literature on global value chain conﬁguration, providing an overview of this topic. Speciﬁcally, we review the literature focusing on the concept of the global value chain and its activities, the decisions involved in its conﬁguration, such as location, the governance modes chosen and the different ways of coordinating them. We also examine the outcomes of a global value chain conﬁguration in terms of performance and upgrading. Our aim is to review the state of the art of these issues, identify research gaps and suggest new lines for future research that would advance our understanding of how ﬁrms are implementing new ways of organizing and managing activities on a global scale.

© 2016 ACEDE. Published by Elsevier Espa˜ na, S.L.U. This is an open access article under the CC BY-NC-ND license (http://creativecommons.org/licenses/by-nc-nd/4.0/ ). Introduction A vast amount of research has focused on different conﬁgu- rational aspects of ﬁrms’ activities worldwide. Speciﬁcally, an important part of the literature has focused on explain- ing the reasons and effects of locating individual activities in foreign countries (Lewin et al., 2009; Martínez-Noya and García-Canal, 2011; Rodríguez and Nieto, 2016; Schmeisser, 2013 ). Nevertheless, research has increasingly broadened this perspective to go beyond the analysis of speciﬁc ∗Corresponding author.

E-mail addresses: [email protected] (V. Hernández), [email protected] (T. Pedersen). activities and encompass the whole value chain. This has prompted the emergence of several lines of research examining different aspects of the global value chain conﬁguration, including: governance types (Buckley and Strange, 2015; Gerefﬁ et al., 2005 ), levels of disaggregation ( Asmussen et al., 2007; Beugelsdijk et al., 2009 ), geographic scope (Los et al., 2015; Mudambi and Puck, 2016 ), and the upgrading processes of the ﬁrms involved (De Marchi et al., 2013; Humphrey and Schmitz, 2002; Lema et al., 2015 ).

Recent studies have reviewed the literature that focuses on the different theoretical perspectives in global supply chain management (Connelly et al., 2013 ). However, a com- prehensive review of the literature dealing with the state of the art of the global value chain conﬁguration has not yet been carried out. Firms are constantly taking decisions http://dx.doi.org/10.1016/j.brq.2016.11.0012340-9436/© 2016 ACEDE. Published by Elsevier Espa˜ na, S.L.U. This is an open access article under the CC BY-NC-ND license (http:// creativecommons.org/licenses/by-nc-nd/4.0/ ). 138 V. Hernández, T. Pedersen Governance Loca tionCoo rdinationPerformance Upgrad ing The global valu e chain confi gu ration Conce pt and activ iti es D ec isions Impl ication s Figure 1 Topics covered in this literature review. in an interconnected world that not only affect their struc- tures, capabilities and results, but also those of the other agents they interact with. It is thus necessary to clearly identify the decisions involved in a global value chain con- ﬁguration that have been already examined and, from that, the aspects that remain unexplored. The purpose of this article is therefore to review the literature on global value chain conﬁgurations in order to systematize it and indicate avenues for future research (see Fig. 1).

The study contributes to global value chain literature in several ways. We believe that, traditionally, research has been focused on speciﬁc topics involved in its conﬁguration such as decisions on location, governance and coordination.

A review examining all of them allows us to better under- stand not only the characteristics of each decision but also the interdependencies between them. Additionally, it allows us to observe the complexity of a global value chain con- ﬁguration that may be constantly evolving due to changes in countries, industries and ﬁrms. All in all, it allows us to identify the topics that remain unexplored and present those lines of research that, in our view, remain unanswered.

The rest of the paper is structured as follows. First, we explain the global value chain concept and the different activities composing it. Secondly, we describe how the liter- ature has classiﬁed the different value chain conﬁgurations and the key decisions in designing the global value chain, namely governance, geographical scope and coordination of activities. Thirdly, we explore the outcomes related to global value chain conﬁgurations in terms of performance and upgrading. Finally, we suggest future lines of research and establish the conclusions that can be drawn from the study. Global value chains: concept and activities Over the years, scholars have analyzed different termi- nology to deﬁne how ﬁrms organize activities such as commodity chains (Gerefﬁ and Korzeniewicz, 1994; Selwyn, 2015 ), supply chains (Al-Mudimigh et al., 2004; Connelly et al., 2013; Priem and Swink, 2012 ), value networks ( de Reuver and Bouwman, 2012; Stabell and Fjeldstad, 1998 ), etc., depending on the speciﬁc relationships that have emerged among ﬁrms and other agents within it ( Gerefﬁ et al., 2001 ). Commodity chains focus on exam- ining industries and the authority and power relationships that have emerged within them to explain the role of a leading ﬁrm (Mahutga, 2012 ) --- the ﬁrm which shapes, con- trols, coordinates and distributes the value along the chain ( Azmeh and Nadvi, 2014 ). A distinction has thus been made between buyer-driven commodity chains --- in which the leading corporation plays a central role as merchandiser and makes sure that all pieces of the business come together --- a n d producer-driven commodity chains --- in which the leading corporation plays a central role in production activ- ities (Gerefﬁ and Korzeniewicz, 1994 ). Other scholars have focused on the analysis of supply chains, where the supply chain concept explains the ﬁrms’ relationships with suppli- ers and customers to deliver product or services at less cost ( Christopher, 2005 ). The value chain concept goes a step further, and explains that entities may be connected and create a value which is a source of competitive advantage ( Al-Mudimigh et al., 2004; Stabell and Fjeldstad, 1998 ). This latter concept also takes into account the customers in a privileged position (Cox, 1999 ), understanding their needs and offering them value (Di Domenico et al., 2007 ), by exam- ining value creation and its capture (Gerefﬁ and Lee, 2012 ).

Moreover, when the value chain involves a constellation of organizational arrangements and ﬁrms that are intercon- nected through a global network, the global value chain concept emerges (De Marchi et al., 2014; Giroud and Mirza, 2015; Mudambi and Puck, 2016 ). Hence, the global value chain is deﬁned as ‘‘the full range of activities that ﬁrms and workers perform to bring a product from its concep- tion to end use and beyond’’, that are carried out on a global scale and that can be undertaken by one or more ﬁrms (Gerefﬁ and Fernandez-Stark, 2011 , p. 4). Speciﬁcally, some scholars point toward a new system called the ‘‘global factory’’ (Buckley, 2011; Buckley and Ghauri, 2004 ), which entails the organization of activities in a complex conﬁgura- tion. This system describes how ﬁrms may reduce location and transaction costs by orchestrating the global value chain in such a way that all activities are linked by international ﬂows of intermediate products that the MNC controls but does not necessarily own, and where knowledge is increas- ingly internalized (Buckley and Strange, 2015 ).

One of the crucial aspects of building an overview of global value chain conﬁguration is therefore an examina- tion of the activities involved, which can be grouped based on different criteria (see Table 1). Porter (1991) differ- entiates primary activities --- those related to producing, delivering and marketing the product or service---from sup- port activities. The latter are either related to creating and sourcing inputs or else to those factors that are integral to the ﬁrm and facilitate the work of primary activities, such as ensuring efﬁciency and effectiveness (Priem and Swink, 2012; Tansuchat et al., 2016 ). It is also possible to distin- guish between upstream and downstream activities, based on their closeness to the exploitation of raw materials or to the manufacturing and customization of the product, respectively (Nicovich et al., 2007; Pananond, 2013; Singer and Donoso, 2008; Verbeke et al., 2016 ). Mudambi (2008) Global value chain conﬁguration: A review and research agenda 139 Table 1 Classiﬁcation of activities in the value chain. Criteria Classiﬁcation Description Studies Degree of involvement in the production processPrimary activities Those including creation, production, logistics, marketing and customer service. Porter, 1991; Priem and Swink, 2012; Tansuchat et al., 2016 Support activities Those related to procurement, technology development, human resource management, and general infrastructure.

Function in the value chain Upstream activities Those close to the exploitation of natural resources and raw materials or those related to design, basic and applied research and the commercialization of creative endeavors. Mudambi, 2008; Mudambi and Puck, 2016; Nicovich et al., 2007; Pananond, 2013; Singer and Donoso, 2008; Verbeke et al., 2016 Middle-end activities Those related to manufacturing and logistics.

Downstream activitiesThose close to the ultimate consumer that add value to the product by manufacturing or customization.

Those related to marketing, advertising, brand management, after-sales services, etc.

Potential for competence creationExploration-related activitiesThose that create new areas of competence by extending the ﬁrm’s capabilities and involving new combinations of resources. Cantwell and Mudambi, 2005; Cantwell and Piscitello, 2015; Ha and Giroud, 2015 Exploitation-related activitiesThose based on the existing ﬁrm’s capabilities.

Potential for being a source of competitive advantageCore activities Activities which are distinctive and crucial for competitive advantage. Espino-Rodríguez and Rodríguez-Díaz, 2014; Gilley and Rasheed, 2000; Linares-Navarro et al., 2014; McIvor, 2000; Quinn, 1999 Essential activities Those activities which are complementary and important for competitive advantage.

Non-core activities Those activities that give low added value to the ﬁrm. adds a third type called middle-end activities. Under this last approach, upstream activities are those that involve design and research, both basic and applied, and the com- mercialization of creative endeavors; downstream activities typically comprise marketing, advertising, brand manage- ment, and after-sales services; and middle-end activities are related to manufacturing, standardized service delivery and other repetitious processes in which commercialized proto- types are implemented on a mass scale. Activities may also be divided by distinguishing between those related to explo- ration from those related to exploitation, based on whether they are competence-creating activities --- such as those that are technologically advanced --- or competence-exploiting activities --- such as those that imply local adaptation while deploying existing technologies (Cantwell and Mudambi, 2005; Cantwell and Piscitello, 2015; Ha and Giroud, 2015 ).

Other classiﬁcations take into account activities’ impor- tance in terms of the ﬁrm’s competitive advantage and distinguish between core and non-core activities (Espino- Rodríguez and Rodríguez-Díaz, 2014; Gilley and Rasheed, 2000; McIvor, 2000 ) or between core, essential and non-core activities (Contractor et al., 2010; Quinn, 1999; Linares- Navarro et al., 2014 ). According to this latter view, core activities are those with high added-value, which are dis- tinctive and crucial for competitive advantage, and are supposed to be the ones the ﬁrm performs better than any other company; essential activities are those needed for sus- taining proﬁtable operations that are complementary and important for competitive advantage; and non-core activi- ties are those that can easily be outsourced. 140 V. Hernández, T. Pedersen How ﬁrms conﬁgure this complex system of activities requires an analysis of different decisions, and we will exam- ine these in the following sections. Conﬁguring a global value chain The conﬁguration of a global value chain has evolved in recent decades. Initially, activities were deﬁned in large blocks ranging from low-end manufacturing and service activities to R&D, design and engineering. More recently, some scholars have pointed out that the value chain can no longer be seen as a set of traditional activities, as ﬁrms have engaged in a process of ﬁne-slicing activities ( Beugelsdijk et al., 2009; Contractor et al., 2010; Mudambi, 2008; Mudambi and Puck, 2016 ). This process of generating ﬁner modules has several implications. On the one hand, ﬁrms have improved their learning about their own systems or about organizing activities in new ways and specifying connections among them; on the other, it has allowed ﬁrms to redeﬁne their core and non-core activities, keeping the true core activities in-house and allocating more resources, time and effort to those activities they do best (Gilley and Rasheed, 2000; Linares-Navarro et al., 2014 ). It implies a process of modularization that takes large groups of activi- ties --- such as those related to R&D, production or marketing --- and disaggregates them into sub-activities (Contractor et al., 2010 ). Indeed, specialization may give some ﬁrms the opportunity to develop superior capabilities that give them a competitive advantage (Jacobides and Winter, 2005 ).

Firms thus have to decide: how to organize their activities --- keep them in house, go to the market or use mixed modes such as alliances with other ﬁrms (Casta˜ ner et al., 2014; Gerefﬁ et al., 2005 ), where to locate these activities (Jensen and Pedersen, 2011; Los et al., 2015; Mudambi and Puck, 2016 ), and how to coordinate them globally (Beugelsdijk et al., 2009; Hansen et al., 2009 ). Moreover, ﬁrms have to take into account that these choices may change and evolve over time depending on the circumstances, and must there- fore review them continuously (Buckley, 2011; Buckley and Ghauri, 2004 ). Governance structures of the global value chain Governance refers to ‘‘authority and power relation- ships that determine how ﬁnancial, material, and human resources are allocated and ﬂow within a [value] chain’’ ( Gerefﬁ and Korzeniewicz, 1994 , p. 97). In international business literature, two traditional governance modes have explained how ﬁrms operate abroad: based on hierarchy or on the market. In other words, ﬁrms have to deal with the make-or-buy decision enounced in the transaction cost the- ory (Coase, 1937; Williamson, 1975 ). However, it seems that explaining the global conﬁguration of value chain activities merely through a hierarchical or a market structure (the two extremes) is far from the reality. As Jacobides and Billinger (2006) explain, ﬁrms can also use alliances and generate par- tial integration with mixed modes. When global value chains are analyzed, a range of governance options thus emerge (see Fig. 2).

At one end we ﬁnd the market governance mode and at the other, the hierarchy mode. The former implies relatively Relationa l supplier High Low Degr ee of explicit coordination Degr ee of power asy mm etry Rela ti onal Capti ve Hierarchy Mark et Modular Materials End Use Value Chains Suppliers Custome rs Price Componen t and m at erial suppliersComponen t and m at erial suppliers Tu r n-key Lead firm Lead firmIntegr at ed Firm Lead firm Relationa l supplier Capti ve suppliers Figure 2 Global value chain governance modes (Gerefﬁ et al., 2005 , p. 89). simple transactions between the ﬁrms involved. Under this structure, buyers and suppliers along the value chain need little cooperation and the cost of switching to new part- ners is low for both. Price is the mechanism for reaching the deal (Gerefﬁ and Fernandez-Stark, 2011 ). The tendency, however, is that ﬁrms within the global value chain are ever more connected, creating a network of independent ﬁrms orchestrated or coordinated by a leading ﬁrm, and providing a context of trust and power within volatile environments ( Buckley, 2016 ). At the other end, we ﬁnd the hierarchi- cal governance mode, which implies vertical integration and managerial control within the lead ﬁrm. Although it is less and less common to ﬁnd ﬁrms integrating the whole value chain, there is research that has focused on examining global value chain conﬁgurations based on foreign direct invest- ment decisions (Hsu and Chen, 2009 ). This structure is more usual when products are complex, codiﬁcation is difﬁcult and competent suppliers are not easily found (Gerefﬁ and Fernandez-Stark, 2011 ).

Between these two extremes, we ﬁnd alternative gov- ernance structures that ﬁt into the Gerefﬁ et al. (2005) classiﬁcation: modular, relational and captive governance structures. Although all of them are based on relationships with other ﬁrms, there are also differences between them.

Modular governance implies that suppliers make products according to a lead ﬁrm’s speciﬁcations, implying a high volume of codiﬁed information ﬂow, while the lead ﬁrm concentrates on the creation, penetration and defense of markets for end products (Sturgeon, 2002 ). In a modular mode, suppliers tend to be highly competent, providing full- package services and taking responsibility for certain stages such as manufacturing through turn-key contracts (PingQing et al., 2007; Wad, 2008 ). For its part, relational governance is more likely when information is more complex, not eas- ily transferred and when greater levels of interactions and knowledge-sharing based on mutual trust and social ties are needed (Altenburg, 2006 ). Relational governance implies that coordination is organized by social relationships and shared norms (Poppo and Zenger, 2002 ). It also allows lead ﬁrms and suppliers to quickly respond to changing conditions using norms of reciprocity for resolving conﬂicts (Sturgeon, 2002 ). Lastly, captive governance structure is the gover- nance mode that entails greater dependence for suppliers, Global value chain conﬁguration: A review and research agenda 141 Table 2 Studies of the governance structures of global value chains. Topic Description Studies Characteristics of governance structuresGovernance modes taking into account the authority and power relationships within the global value chain. Altenburg, 2006; Gerefﬁ et al., 2005; Gerefﬁ and Fernandez-Stark, 2011; Hsu and Chen, 2009; Jacobides and Billinger, 2006; Sturgeon, 2002 External conditions affecting governance structuresIndustry conditions such as life cycle, entry barriers, changes in the market, etc. Buckley, 2011; Gerefﬁ and Lee, 2012; Mahutga, 2012; Qian et al., 2012 Internal conditions affecting governance structuresFirm conditions such as size, ﬁrm ability to organize the value chain, ﬁrm capabilities in speciﬁc activities, etc. Buciuni and Mola, 2014; Buckley, 2016; Buckley and Strange, 2015; De Marchi et al., 2014; Giroud and Mirza, 2015; Mudambi, 2008; Mudambi and Venzin, 2010; Qian et al., 2012; Yeniyurt et al., 2013 which operate under the lead ﬁrms’ conditions, with high degrees of monitoring and control from them (Gerefﬁ et al., 2005 ). This implies that suppliers are in a worse position for bargaining for higher selling prices but a better position for receiving support from lead ﬁrms (Altenburg, 2006 ).

The conﬁguration of the value chain in each of these governance structures may depend on several factors. First, external conditions, such as those in the industry, may affect the governance structures in the value chain conﬁguration. Qian et al. (2012) relate the likelihood of internalizing value chain activities to the life cycle of the industry and whether the ﬁrm is an early mover or a late entrant. Indeed, gov- ernance modes may vary over time as the industry matures and evolves (Gerefﬁ and Lee, 2012 ). The existence of entry barriers may also affect governance structures. Mahutga (2012) explains the existence of modular and relational value chains when entry barriers are high, captive and hier- archical value chains when entry barriers are intermediate, and quasi-market and modular value chains when entry bar- riers are low. As Buckley (2011) concludes, the dynamics of the industry and changes in the market, such as customer demand or technologies, also determine the structure of the global value chain under integrated or non-integrated structures.

Second, there are other relevant internal conditions within the ﬁrms that can affect the governance mode. De Marchi et al. (2014) point out that the position of the lead ﬁrm in buyer-driven and producer-driven commodity chains is different, implying different governance struc- tures. Studies have also considered ﬁrm factors such as the size of the ﬁrm to explain governance structures (Buciuni and Mola, 2014; Roza et al., 2011 ). The choice of one gov- ernance structure or another may also depend on whether or not the ﬁrm has the speciﬁc capabilities required to inte- grate activities along the value chain. Internalizing activities requires capabilities related to coordinating, organizing and managing afﬁliates (Qian et al., 2012 ), so vertical inte- gration is attractive for ﬁrms with the capabilities that help them to stimulate cross-activity coordination, learning and innovation (Mudambi, 2008 ). Alternative modes require other capacities, such as relational and networking abili- ties (Giroud and Mirza, 2015 ). Speciﬁcally, ﬁrms trying to implement a global strategy through partnerships need to possess the skills and capabilities that allow them to man- age them effectively and efﬁciently, such as the ability to share information and the ability to develop global and local responsiveness (the ability to initiate actions based on knowledge generated and disseminated across the orga- nization) to suppliers (Yeniyurt et al., 2013 ). Additionally, ﬁrms may choose different governance modes depending on the capabilities they have in certain activities. As Mudambi and Venzin (2010) explain, ﬁrms are more prone to maintain control over the value chain if they have stronger compe- tencies in manufacturing or standardized service delivery, and may link them to more knowledge-intensive activities in R&D, design and marketing. On the other hand, special- ization and focus on controlling certain activities is more likely in companies with stronger dynamic competencies in internal knowledge-intensive activities but weaker compe- tencies in linking standardized and specialized activities. Table 2 offers an overview of the studies analyzing differ- ent aspects of governance structures in a global value chain conﬁguration.

Despite the amount of research on this topic, we can ﬁnish this subsection by suggesting some lines for future research. Existing research has examined ﬁrm features to explain governance decisions in the global value chain, but opportunities for broadening our understanding still remain.

On the one hand, ﬁrm’s factors affecting global value chain conﬁguration may be related to the ownership type of lead- ing ﬁrms. Some scholars point to this aspect as a future line of research in which, for example, family and non-family ﬁrms are compared (Fernández and Nieto, 2014 ). It would also be interesting to test empirically the implications of the different governance modes described in the literature.

Scholars have traditionally focused on comparing different governance modes for speciﬁc activities (Casta˜ ner et al., 2014; Nieto and Rodríguez, 2011; Rodríguez and Nieto, 2016 ) and only scant research has considered the global value chain as the unit of analysis (Buciuni and Mola, 2014 ). Addi- tionally, as we have seen in this review, most of the studies adopt a static perspective when examining the governance decisions around the conﬁguration of the global value chain.

Nevertheless, as technologies evolve, the comparative advantages of countries change, new specialized suppli- ers appear, and activities become more standardized. The 142 V. Hernández, T. Pedersen options for modularizing and ﬁne-slicing activities may thus increase. Firms may therefore reconﬁgure their value chains in new ways. Scholars have to recognize these changes and movements in order to explain the evolution of decisions related to the governance structure of the global value chain and explain the dynamics that emerge within it over time. Geographic scope of the global value chain The fragmentation of the value chain has also entailed a dispersion of activities around the globe. Thus, manage- ment literature has used the term ‘‘global value chain’’ for those cases in which some functions are located in other countries. However, limitations exist in this literature for different reasons. First, some studies examining the geo- graphical scope of ﬁrms’ activities claim that we cannot talk about global but only about a regional distribution of them (Rugman et al., 2009 ). Some scholars explain that pro- duction occurs in regional blocks that can be grouped into three ‘‘Factories’’: Factory Asia, Factory North America and Factory Europe (Baldwin and Lopez-Gonzalez, 2015 ). MNEs managing global networks are increasingly inclined to work with fewer, larger and more capable suppliers, operating in a reduced number of strategic locations around the world, and favoring regionalization (Gerefﬁ and Fernandez-Stark, 2011 ). Los et al. (2015) explain, however, that this trend does not reﬂect reality and that regional effects could be explained by the fact that some studies examine trade in terms of intermediate inputs instead of the value added, thus overestimating the internal regional trade in down- stream inputs.

Second, strategic management literature has explained that ﬁrms should disperse their activities globally and choose the best locations for them to obtain a competitive advan- tage (Gupta and Govindarajan, 2001 ). Nevertheless, the research has focused on the analysis of speciﬁc activities and how there should be a match between them and the charac- teristics of the host country (Demirbag and Glaister, 2010; Hsu and Chen, 2009; Jensen and Pedersen, 2011 ; among others). Although these studies show the reasons for locat- ing different activities in speciﬁc countries and the beneﬁts thus obtained, they do not show the geographical scope of a value chain, nor take into account the complexity of today’s business world or the broader range of the ﬁrm’s strategic choices (Wiersema and Bowen, 2011 ). The key is therefore to examine these components as a whole (Mudambi and Puck, 2016 ). Otherwise, it would be impossible to take into consid- eration several factors that are necessary for evaluating the effects of a global value chain conﬁguration. Some research is adopting this perspective of including the whole system, in order to explore the ‘‘degree of globalness’’ of the value chain (Verbeke and Asmussen, 2016 ). Similarly, Asmussen et al. (2007) identify three types of value chain conﬁgura- tions by taking into account the MNEs’ geographical scope --- international, multi-domestic and global value chains. This vision, however, focuses on the examination of MNEs as the unit of analysis, which may hide the existence of global value chains that include externalized and internalized activities. Mudambi and Puck (2016) conclude that the footprint of MNEs is global when a value-chain based approach is used which also incorporates all the externalized activities. More studies are therefore needed to explain this issue. Moreover, another important issue to consider when activities are globally dispersed is how ﬁrms may need to adapt to local market differences while at the same time needing to exploit economies of scale and scope and maximize knowledge transfers across locations (Gupta and Govindarajan, 2001 ). Conﬁguring a global value chain may imply managing heterogeneous languages, cultures, regula- tions, etc. The capabilities required in each market usually differ, and this pushes ﬁrms to implement higher levels of monitoring and control (Gerefﬁ et al., 2005 ). Firms may balance their internal embeddedness with the external embeddedness in each host country (Meyer et al., 2011 ).

Moreover, capabilities and the learning effect needed to manage different locations may be different depending on the type of value chain activity considered (Verbeke et al., 2016 ). More research is therefore needed in order to explain how ﬁrms solve the challenges they encounter when faced with a diversity of institutions and discover which aspects ﬁrms may change in order to smooth potential negative impacts.

Lastly, the literature has explained that there are contin- gencies that affect ﬁrms in their options for geographically conﬁguring a global value chain. Some scholars note that the type of industry is a factor to consider as some industries are restricted by entry barriers that make it more difﬁcult to conﬁgure value chains on a global level. Mahutga (2012) argues that the likelihood of global value chains existing is greater in industries that have low entry barriers to manu- facturing, such as the garment industry, as there are more options for externalizing and ﬁnding suppliers globally. From a ﬁrm perspective, it is important that ﬁrms have a global orientation (Zou and Cavusgil, 2002 ). When ﬁrms conﬁgure a global strategy they need to have a global mindset (Murta et al., 1998 ) and some capabilities, such as cultural aware- ness or locational ﬂexibility, are critical factors for success when conﬁguring a global value chain (Eriksson et al., 2014 ).

Additionally, ﬁrms having greater organizational and tech- nological capabilities for coordinating a dispersed set of economic activities may more easily reach a global con- ﬁguration (Levy, 2005 ). Nevertheless, future research may explain how ﬁrms may change the ‘globalness’ of their value chains. There are ﬁrms that are born with a global mandate and conﬁgure a global value chain from the very beginning.

There are also, however, ﬁrms that develop a restructuring process in order to make their value chains global or sim- ply because agents in the value chain change their location decisions. Differences between them, their decision-making processes and their implications would be an interesting line of investigation. To summarize, Table 3 offers an overview of the studies analyzing the location decisions of a global value chain conﬁguration. Coordinating global value chain activities Considering the mix of activities together with their gov- ernance and location decisions, a global value chain conﬁguration requires decisions to be taken about the coor- dination between actors at different functional positions ( Ponte and Gibbon, 2005 ). In this regard, one of the key issues in the global value chain literature is the role of the lead ﬁrm. Moreover, the need for coordination also arises Global value chain conﬁguration: A review and research agenda 143 Table 3 Studies considering the geographic scope of global value chains. Topic Description Studies Degree of ‘globalness’ Regional vs. global Asmussen et al., 2007; Baldwin and Lopez-Gonzalez, 2015; Gerefﬁ and Fernandez-Stark, 2011; Los et al., 2015; Mudambi and Puck, 2016; Rugman et al., 2009; Verbeke and Asmussen, 2016 External conditions affecting the geographic scope of global value chainsIndustry factors Mahutga, 2012 Market differences Gerefﬁ et al., 2005; Gupta and Govindarajan, 2001; Meyer et al., 2011 Capabilities required in global value chainsOrganizational and technological capabilities Eriksson et al., 2014; Levy, 2005; Murta et al., 1998; Zou and Cavusgil, 2002 from the necessity to simultaneously combine different operation modes in their value chains (Benito et al., 2011, 2012 ). Speciﬁcally, ﬁrms may combine governance modes in the different activities of the value chain in a foreign mar- ket, or combine mode packages for an activity in one or more countries (Benito et al., 2009 ). A situation like this implies that ﬁrms need to ﬁnd a balance between the bene- ﬁts of an optimal governance structure and the costs derived from greater organizational complexity (Benito et al., 2011 ).

Moreover, they have to coordinate governance modes sup- porting the ﬁrm’s objectives (Petersen and Welch, 2002 ), while at the same time taking into account that each mode of operation requires a different combination of skills ( Casillas and Moreno-Menéndez, 2014 ).

Another interesting line of research explains how man- agers combine modes, apply and evaluate different mode packages (Benito et al., 2009 ). As Asmussen et al. (2009) highlight, companies involved in a global strategy require that spatially dispersed activities are tightly coordinated.

Managing a global value chain implies taking governance decisions across different host countries and activities that cannot be considered independently because there are interdependencies between them, in terms of strategic con- trol and learning (Hashai et al., 2010 ). Challenges then emerge as, in most cases, ﬁrms have to manage not only their internal networks but also the external ones. Having connections with several suppliers along the value chain may increase confusion and information overload (Chiu, 2014 ).

Future research should consider this pattern, examining interdependencies between governance and location deci- sions and the factors that could facilitate global value chain coordination.

Moreover, these coordination activities require a dynamic perspective to explain how and why ﬁrms change operation modes (Benito et al., 2012 ). Literature shows that ﬁrms have to be constantly reexamining the global redistribution of capabilities (Lema et al., 2015 ). Speciﬁcally, the lead ﬁrm has to take into account changes in other ﬁrms in the global value chain and their evolution, because these can mod- ify the capabilities of those other ﬁrms and thus affect the coordination of activities and markets in the value chain (De Marchi et al., 2014 ). A combination of decisions might thus be optimal at a given point in time, but not in the future ( Gupta and Govindarajan, 2001 ). Firms have to be aware of the possibility of changing their decisions. Future research could empirically examine the evolution and challenges that the different ﬁrms involved in the global value chain may encounter.

Another interesting topic is related to the way ﬁrms coor- dinate these activities worldwide and considers the degree of replication of activities in different locations. Specif- ically, some scholars distinguish between dispersed and concentrated global value chains (Hansen et al., 2009 ). A dispersed global value chain implies the replication of activ- ities country by country, making multinational units operate independently. This matches one of the types of value chains identiﬁed by Yi p (1989, p. 31) , the multi-domestic ﬁrm conﬁguration, in which foreign subsidiaries are autonomous units with ‘‘all or most of the value chain reproduced in every country’’. This conﬁguration implies the exist- ence of afﬁliates operating independently with lower levels of coordination needs and more focus on satisfying local responsiveness (Hansen et al., 2009 ). However, it sacriﬁces the potential beneﬁts of scale economies (Beugelsdijk et al., 2009 ) and at the same time incurs costs derived from repli- cating subsidiaries, lack of standardization, etc., which are the pros of the global strategy (Moon and Kim, 2008 ).

A concentrated global value chain, conversely, implies the creation of highly specialized afﬁliates, each with a geo- graphic scope that transcends a local market (Frost et al., 2002 ), which operate with other afﬁliates in a network. In an extreme case, each value chain activity takes place in a different country. This would allow ﬁrms to beneﬁt from the various advantages derived from the disaggregation and modularization of the value chain into independent units ( Beugelsdijk et al., 2009 ). This conﬁguration is considered to deﬁne a pure global ﬁrm (Asmussen et al., 2007; Roth et al., 1991; Yip, 1989 ). Nevertheless, it involves a global distribution of work with geographic and time gaps between work locations, which may generate problems. First, it may imply costs related to transportation, tariffs, delays, or to dependencies on a speciﬁc location (Giroud and Mirza, 2015 ). Second, unexpected costs may emerge that derive from the greater complexity of implementing the offshoring of functions (Larsen et al., 2013 ). Third, dispersion and disaggregation may also imply management and communi- cation efforts and control difﬁculties due to the signiﬁcant number of activities divided into discrete slices. These addi- tional efforts and difﬁculties may, at some point, exceed the potential beneﬁts (Contractor et al., 2010; Kumar et al., 144 V. Hernández, T. Pedersen Table 4 Beneﬁts and drawbacks of dispersed and concentrated global value chains. Beneﬁts Drawbacks Studies Dispersed global value chainReduce coordination costs and dependencies.

Satisfy local responsiveness.Replication costs appear.

Sacriﬁce economies of scale. Beugelsdijk et al., 2009; Hansen et al., 2009; Moon and Kim, 2008 Concentrated global value chainExploit arbitrage of national differences.

Achieve specialization and disaggregation advantages.Transportation costs, tariffs, delays.

Costs of implementation.

More communication, coordination and control needs.

Overdependence and opportunism. Contractor et al., 2010; Giroud and Mirza, 2015; Hansen et al., 2009; Kumar et al., 2009; Larsen et al., 2013; Mauri and Neiva de Figueiredo, 2012 2009 ). Lastly, costs related to opportunism are signiﬁcant, especially in concentrated value chains that use partners and do not internalize activities (Hansen et al., 2009 ).

Firms operating within this type of conﬁguration have fewer redundancies but at the same time are more risk-exposed because of the lower margin for errors and greater exposure to unforeseen outcomes (Mauri and Neiva de Figueiredo, 2012 ). This conﬁguration thus requires organizational design mechanisms, such as network structures, modularization, delegation, electronic communication infrastructures and standardizing interfaces (Pedersen et al., 2014; Ponte and Gibbon, 2005; Srikanth and Puranam, 2011 ). Additionally, offshoring experience and a strong orientation toward an overall system of structures and processes have been con- sidered to be factors that allow ﬁrms to anticipate the costs of the dispersion of activities and avoid its negative effects ( Larsen et al., 2013 ). Table 4 summarizes the beneﬁts and drawbacks of each type of coordination.

Nevertheless, many other aspects remain underexplored.

An interesting line of research in this area may be to examine these coordination structures by considering different ﬁrm factors such as size. Traditionally, global value chain con- ﬁguration has mainly been explored through the study of large ﬁrms. They have been considered to have more of the resources and capabilities that enable them to design inte- grated structures. A dispersed or concentrated value chain may, however, imply different challenges and opportunities for SMEs. Other factors such as the value chain’s owner- ship structure and country of origin, the dynamism of the industry, etc., may also be relevant.

All in all, in order to systematize all the aspects covered above, we created Table 5 to provide an overview of the studies analyzing how the activities of global value chains are coordinated. Implications of global value chain conﬁgurations Implications for performance The literature has also explained some of the outcomes from global value chain conﬁgurations. Speciﬁcally, scholars have posited that an effective global value chain conﬁgu- ration may have a positive impact on business performance ( Kim et al., 2003 ). Similarly, some literature examining inward-outward connections explains the positive effects on ﬁrm growth resulting from the connections between international activities in the upstream and downstream parts of the value chain (Hernández and Nieto, 2015 ). Other performance measures have also been examined. Some scholars have highlighted the fact that activities related to the upstream side of the value chain may generate advantages for activities related to the downstream side of the value chain, such as international sales (Bertrand, 2011; Di Gregorio et al., 2009; Hätönen, 2009 ). These studies are common when the ﬁrm is examined as the unit of analysis. Less research exists, however, into how different ﬁrms within a global value chain, generate their performance or how the value is appropriated between the different agents. An exception is the study by Kaplinsky (2000) which, from a macro-level perspective, explains that some parties gain and other lose in the global value chain and suggests some movements that could be made by the economic actors to reverse that situation. Other research goes beyond performance generation and explains mechanisms that enable value appropriation. Speciﬁcally, it has been argued that if lead ﬁrms are able to leverage power over their suppliers they may appropriate the value generated, since they may increase ﬂexibility and take advantage of external competencies in terms of better quality or lower costs (Buckley and Strange, 2015 ).

Another important issue explored in the literature about the implications of value chain activities is related to innova- tion performance. Chiu (2014) posits that supplier diversity allows ﬁrms to enable new skills and technologies, improve their assimilative power, and broaden perspectives, and all this helps ﬁrms to track new discoveries and advances. Addi- tionally, one important topic in this area is also related to the appropriation of the value generated by innovations within a global value chain model. Hence, Dedrick et al. (2009) describe differences related to how the control of key ele- ments enables some ﬁrms to capture supernormal returns on innovation. From a different perspective, focused on the complementary assets of lead ﬁrms for making innovations a commercial success, Shin et al. (2009) argue that these ﬁrms may capture more beneﬁts from innovations even when they are developed by non-lead ﬁrms. Table 6 offers an overview of the literature examining the different performance implications of a global value chain conﬁguration. Despite the research we have reviewed, we consider that more literature is especially needed that Global value chain conﬁguration: A review and research agenda 145 Table 5 Studies considering coordination decisions of global value chains. Topic Description Studies Coordination of actors in the value chainAnalysis of the role of lead ﬁrms in control, coordination and distributing value. Azmeh and Nadvi, 2014; Ponte and Gibbon, 2005 Coordination of operation modes in the value chainExamination of how to combine operation modes in the different activities involved in the global value chain. Asmussen et al., 2009; Benito et al., 2009; Benito et al., 2011; Benito et al., 2012; Casillas and Moreno-Menéndez, 2014; Hashai et al., 2010; Petersen and Welch, 2002 Evolution of the coordination of the global value chainStudy of dynamics in the global value chain over time. Benito et al., 2012; De Marchi et al., 2014; Lema et al., 2015 Coordination of activities Characteristics of concentrated and dispersed global value chains. Beugelsdijk et al., 2009; Contractor et al., 2010; Frost et al., 2002; Hansen et al., 2009; Mauri and Neiva de Figueiredo, 2012 Explanation of coordination mechanisms needed in the global value chain. Pedersen et al., 2014; Ponte and Gibbon, 2005; Srikanth and Puranam, 2011 examines the performance outcomes of a global value chain conﬁguration from a strategic management perspective.

Speciﬁcally, more studies are needed that analyze how the different global value chain conﬁgurations (which dif- fer in terms of governance, geographic scope and levels of coordination), may affect lead ﬁrms’ performance and the outcomes of the rest of the agents in the global value chain.

Moreover, it is necessary to shed light on the way each agent contributes to ﬁnancial proﬁt or other outcomes and how changes in market conditions may affect their distribution ( Contractor and Reuer, 2014 ). Implications for upgrading processes Another line of research, which is related to the innova- tion aspect we explained before, is focused on analyzing the improvement in innovation capabilities. Some scholars posit that these capabilities may appear in lead ﬁrms, but also in subsidiaries and independent suppliers in foreign countries (Lema et al., 2015 ). This topic connects with those studies that have examined upgrading processes derived from global value chain conﬁgurations. Gerefﬁ et al. (2005) deﬁne upgrading as ‘‘the process by which economic actors --- nations, ﬁrms and workers --- move from low-value to rela- tively high-value activities in global production networks’’ (p. 171). Both lead and supplier ﬁrms can upgrade their capabilities as a consequence of a global value chain con- ﬁguration. And they can upgrade in several ways: product, process, functional and inter-chain upgrading (Humphrey and Schmitz, 2002; Blazek, 2015 ). But special emphasis has been given to the upgrading process for local producers that can learn from global buyers.

Some scholars point out, indeed, that it is the lead ﬁrms that are the ones that can affect the upgrading potential of the rest of the actors on that value chain (Azmeh and Nadvi, 2014 ). Also related to this, entities from developing countries can really experience an upgrading process and move from developing low-value added activities to high- value added ones (Pananond, 2013 ). These ﬁrms have gained access to global markets (Gerefﬁ et al., 2005 ). Indeed, some literature focuses on how this upgrading process has allowed emerging market ﬁrms to undertake outward internationalization as a result of the knowledge acquired Table 6 Studies explaining the performance implications of global value chain conﬁgurations. Topic Description Studies Firm growth Effective conﬁguration of the global value chain. Kim et al., 2003 Connections between activities. Hernández and Nieto, 2015 Appropriation of value among actors in the global value chain. Buckley and Strange, 2015; Kaplinsky, 2000; Shin et al., 2009 International expansion Connections between activities. Bertrand, 2011; Di Gregorio et al., 2009 Offshoring of value chain activities. Hätönen, 2009 Innovation performance Beneﬁts of diversity. Chiu, 2014 Appropriation of the value of innovations. Dedrick et al., 2009 146 V. Hernández, T. Pedersen Table 7 Studies explaining upgrading implications of global value chain conﬁgurations. Topic Description Studies Upgrading capabilities Innovation capabilities. Lema et al., 2015 Affecting product, processes, and functions. Humphrey and Schmitz, 2002; Blazek, 2015 Upgrading processes of developing-country ﬁrmsKnowledge transfers from developed-country ﬁrms. Alcácer and Oxley, 2014; Azmeh and Nadvi, 2014; Gerefﬁ et al., 2005; Luo and Tung, 2007; Makino et al., 2002; Pananond, 2015 Social upgrading. Barrientos et al., 2011; Clarke and Boersma, 2015; Connelly et al., 2013; De Marchi et al., 2013; Gerefﬁ and Lee, 2016; Kaplinsky, 2004 Factors affecting upgrading processesIndustry factors. Gerefﬁ and Fernandez-Stark, 2011 Types of global value chains. Hansen et al., 2009; Humphrey and Schmitz, 2002 from the inward internationalization carried out by West- ern countries in developing nations (Luo and Tung, 2007 ).

As a result, ﬁrms from emerging countries are becoming more and more important players in the international arena and their countries are not just the recipients of activi- ties from developed-country ﬁrms. This process has also implied that ﬁrms from emerging and developed countries have different motivations and ways of conﬁguring global value chains. Firms from emerging countries may locate their R&D and marketing activities in advanced economies in order to develop capabilities which allow them to catch up with their rivals from developed countries and are nec- essary to compete there (Luo and Tung, 2007; Makino et al., 2002 ). Moreover, this is a way of then counter-attacking their global rivals in their own domains and a way of overcoming their latecomer disadvantage, especially in aspects related to consumer base, brand recognition and technological lead- ership (Pananond, 2015 ). Nevertheless, some research has explained that factors such internal capabilities as well as to whom you supply, impact the degree of learning achieved ( Alcácer and Oxley, 2014 ).

A global value chain conﬁguration can have addi- tional implications related to other upgrading processes.

Firms from developing countries may also achieve social upgrading 1(Barrientos et al., 2011 ). In fact, these aspects have implied a broad range of questions in recent literature within different areas. From a human resources manage- ment perspective, scholars are increasingly worried about explaining the implications for working conditions and rights ( Clarke and Boersma, 2015 ); from the point of view of corporate social responsibility management, scholars are exploring the implications for the level of awareness that lead ﬁrms have about the practices along the whole value chain (De Marchi et al., 2013 ); from an institutional point of view, studies are exploring the possible evolution and upgrading of host country institutions (Connelly et al., 2013; Kaplinsky, 2004 ). All in all, this social upgrading process is driven by different factors, requires different mechanisms 1Social upgrading refers to the process of improving the rights and entitlements of workers and enhancing the quality of their employment. and different actors are involved in it (Gerefﬁ and Lee, 2016 ).

Upgrading processes may be affected by other factors.

The literature has considered that upgrading paths depend on the industry and the input---output structure. Some indus- tries require linear upgrading activity by activity, whereas others, especially those related to services, present non- linear upgrading paths (Gerefﬁ and Fernandez-Stark, 2011 ).

Similarly, different types of global value chains may also affect upgrading. Humphrey and Schmitz (2002) explain that quasi-hierarchical chains offer better conditions for process and product upgrading but worse for functional upgrading.

For their part, Hansen et al. (2009) conclude that there are differences between ﬁrms implementing dispersed ver- sus concentrated value chain conﬁgurations in terms of the likelihood of upgrading local partners from developing countries. And it is this upgrading which may most pro- foundly affect local partners. Table 7 offers an overview of the studies explaining the upgrading outcomes of a global value chain conﬁguration.

All in all, more research could extend this line of lit- erature. Upgrading has been mainly explored from the viewpoint of how emerging-country ﬁrms have participated in the global value chains of Western ﬁrms and have upgraded their positions within these value chains (Buckley and Strange, 2015 ). Future research could also explore how this process may also imply that these ﬁrms could develop their own global value chains and how the transformation arises. Another topic that is interesting and remains under- explored is the case of downgrading, which means that ﬁrms may voluntarily or involuntarily move toward the produc- tion of simpler goods or focus on lower or smaller segments ( Barrientos et al., 2011; Blazek, 2015 ). Future research may examine the mechanisms needed for avoiding this process or for recognizing it as the optimal strategy. Discussion and an agenda for future research To summarize, the purpose of this study was to revise the literature around global value chain conﬁgurations. To do so, we have focused on three areas. Firstly, we have reviewed the literature that deﬁnes the concept of the global value Global value chain conﬁguration: A review and research agenda 147 chain and the different types of activities examined on it. Secondly, we have reviewed the literature that exa- mines the different decisions necessary to conﬁgure a global value chain: governance structure, geographic scope and coordination scheme. Thirdly, we have taken into account the research covering the implications of a global value chain conﬁguration, both in terms of ﬁrm performance and upgrading effects.

Throughout the paper, we have not only examined the literature, we have also suggested the opportunities for developing this literature. These are summarized below.

• Regarding decisions related to global value chain conﬁg- uration, future research may explore ﬁrm factors that could affect the way ﬁrms in the global value chain make their decisions. Aspects such as the impact of size or type of ownership remain underexplored, especially in respect of governance and coordination decisions. More- over, decisions may differ depending on whether the ﬁrm is global from its outset or it is a ﬁrm following a tradi- tional path of internationalization. The latter type of ﬁrm has to reconﬁgure the way it operates in the value chain, especially regarding the location decision and the geo- graphic scope of the value chain. An important aspect of governance, location and coordination decisions is related to the dynamics that may emerge over time. Thus, more research is needed that scrutinizes how ﬁrms change their global value chain conﬁgurations, including the factors determining these changes.

• The performance effects of different types of value chains in terms of governance, their geographical scope or their level of coordination remain underexplored. Scho- lars could also focus on contingencies that could help ﬁrms to identify which decisions may beneﬁt them more.

• A third line of research is related to the effects on upgrad- ing capabilities. A global value chain conﬁguration may imply transformation processes that could affect the way ﬁrms develop their capabilities or allow them to deterio- rate. Future research could also explore the mechanisms by which ﬁrms may avoid downgrading processes.

Moreover, there are two additional aspects that future research on global value chain conﬁguration should take into account:

• There should be more quantitative studies analyzing the global value chain conﬁguration. Many scholars describe the global value chain conﬁguration from a theoretical or a qualitative perspective. Future research should there- fore include more quantitative studies into the factors that affect the different decisions behind a global value chain conﬁguration.

• An examination of the global value chain may be con- ducted from a multilevel perspective. Speciﬁcally, the different decisions involved in the global value chain conﬁguration could be examined by considering the possi- ble interdependencies between the different transactions and/or activities and that affect the whole of the value chain. Conclusions Conﬁguring the global value chain is one of the most impor- tant topics in today’s literature. The goal of the present work is to review the literature related to global value chain con- ﬁguration in order to give a clear vision of the state of the art in this ﬁeld. A more connected world in which change is more rapid implies that ﬁrms are changing their structures in order to remain competitive. Accessing resources and markets globally is, increasingly, a necessary condition but not sufﬁcient per se. Firms have to combine locations and modes of governance in order to deﬁne their value chains, and must accept that they have to coordinate them within a network in which other agents also interact. We believe that the analysis of the global value chain conﬁguration, its concept, the decisions involved and the consequences or outcomes resulting from its management not only provide the basis for understanding this phenomenon but also intro- duce new topics and questions that remain unexplored and need further research. Acknowledgement This study has been partially supported by ﬁnancial aid from the Spanish Ministry of Economy and Competi- tiveness (Projects ECO2012-36160 and ECO2015-67296-R (MINECO/FEDER, UE)) and from the Project INNCOMCON-CM S2015/HUM-3417 (coﬁnanced by the Communtiy of Madrid and European Social Fund). References Alcácer, J., Oxley, J., 2014. Learning by supplying. Strateg. Manage.

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