Collaborative public spaces and upgrading through global value chains: The case of Dongguan, China

• Date: 01 August 2020
• DOI: http://doi.org/10.1002/gsj.1378
• Author: Michael Murphree,Dan Breznitz
• Published date: 01 August 2020

SPECIAL ISSUE ARTICLE

Collaborative public spaces and upgrading

through global value chains: The case

of Dongguan, China

Michael Murphree

1

| Dan Breznitz

2

1

Darla Moore School of Business, University of South Carolina, Columbia, South Carolina

2

Munk School of Global Affairs, University of Toronto, Toronto, Ontario, Canada

Correspondence

Michael Murphree, Darla Moore School

of Business, University of South Carolina,

1014 Greene St, Office 461E, Columbia,

SC 29208.

Email: michael.murphree@moore.sc.edu

Funding information

Center for International Business

Education (CIBE), University of South

Carolina, Grant/Award Number:

P220A180009

Abstract

Research Summary: How do multinational enter-

prises (MNEs) address host-country challenges after the

initial investment? And when does foreign direct

investment (FDI) result in local upgrading? Using a

study of FDI and global value chain participation in

Dongguan, China, we find a mechanism in which FDI

results in sustained local economic upgrading and

improved MNE subsidiary performance: a collaborative

public space (CPS). A CPS is a social space based on

trust that enables different and divided actors to

engage, sharing concerns and information in ways that

they otherwise would be disinclined to consider. Using

the CPS concept, we expand understanding of the effec-

tiveness of MNE strategies in host-country environ-

ments and the conditions in which FDI leads to change

in global value chains.

Managerial Summary: The international strategy lit-

erature has found that FDI has ambiguous impacts on

host-country regions and firms, leading in some cases

to upgrading or in others to local firm deskilling or

decline. It has also shown that the postinvestment strat-

egies of MNEs, particularly political connections or

business associations, have mixed results. Using the

concept of a CPS, we show how the construction of a

trust-based social space can improve MNE subsidiary

Received: 14 February 2018 Revised: 29 December 2019 Accepted: 15 January 2020

DOI: 10.1002/gsj.1378

556 © 2020 Strategic Management Society Global Strategy Journal. 2020;10:556–584.wileyonlinelibrary.com/journal/gsj

and local firm performance and lead to changes in the

structure and composition of global value chains

(GVC). The GVC changes by incorporating new host-

country suppliers and buyers as well as increasing the

value-added, thus creating a new node and exchange

patterns in the GVC.

KEYWORDS

China, global value chains, international business, international

strategy, trust

1|INTRODUCTION

Participation in global value chains (GVCs) and foreign direct investment (FDI) has consistently

been found to have significant impact on economic development in emerging economies.

Ambiguous findings in the literature suggest two gaps: (a) research has yet to elucidate the

mechanisms by which GVC participation and FDI shape local economic and firm development;

and (b) whereas much has been published about multinational enterprises' (MNEs) use of polit-

ical ties or collective action, we know much less about the types and impacts of MNE and host-

country firm strategies and actions after investment. This suggests the following research

question:

What is the relationship between MNE postinvestment engagement strategies and firm (for-

eign-invested and local) performance in the context of GVCs in emerging economies?

This article develops a model that accounts for broadly positive impacts of FDI and GVC

participation through the mechanism of a collaborative public space (CPS) (Breznitz, 2005).

The model helps address the ambiguity in the literature by accounting for why and when

knowledge transfer and upgrading are facilitated. We show how a CPS emerges and its impact

on MNE subsidiaries and local firms. In brief, the CPS facilitates changes in the local operating

environment that enhance MNE subsidiaries' performance and help plug local firms into MNEs'

supply networks and broader GVCs. A CPS fosters trust and multidirectional information flows

among MNEs, local governments, and local firms, creating an ecosystem that facilitates firm

performance and upgrading, thereafter shifting the structure and orientation of the GVC.

As evidence, we draw on a hundred semistructured interviews conducted in an inductive

study of Taiwanese MNE subsidiaries in Dongguan, China, from 2008 to 2017. This rich

dataset allows us to trace the processes by which Taiwanese MNE subsidiaries faced and over-

came severe postinvestment operational problems and developed a collective action mechanism

with local policy makers through meetings of the Taiwanese Business Association (TBA).

This article makes several contributions to the international business strategy literature in

the context of GVCs. First, it introduces and operationalizes the concept of a CPS as an explana-

tory mechanism to account for the ambiguity in findings concerning local firm performance fol-

lowing investment by foreign MNEs and GVC participation. Second, we expand our

understanding of how and when MNEs and local firm strategies can be successfully deployed in

MURPHREE AND BREZNITZ 557