The Law of Global Value Chains

Global value chain (GVC) analysis captures how firms become the dominant organizational form in the coordination of global social relations of production (Baglioni et al., 2017: 315), breaking with state-centric approaches to understanding economic development. Changing patterns of global production and the prevalence of outsourcing mean that industrial capacity is owned by producers in developing countries but controlled to a significant extent by lead firms located in developed economies (Gereffi, 2018: 255). From this starting point, GVC analysis focuses on how global lead firms ‘drive’ the actions of other firms in the chain (Gereffi et al., 2005; Gibbon et al., 2008). These dynamics of ‘drivenness’ are undergirded by a legal infrastructure, which plays a crucial role for the governance and coordination of the chain and for the generation and distribution of economic value (The IGLP Law and Global Production Working Group, 2016; Danielsen, 2005). A key part of this legal infrastructure are mechanisms of contractual governance, which both ensure control over value chains and formalize power asymmetries among the different actors. For instance, suppliers might be pushed to assume disproportionate financial risk, while lead firms can disengage from their contractual relationships at their discretion (Anner, 2020; Hering, 2021). Yet implicit in the capacity of lead firms to control and drive the chain through mechanisms of contractual governance is also their potential to act as regulators of the production process, possibly guaranteeing labour, social, and environmental standards by pressuring suppliers. Lead firms export legal frameworks that eventually shape the law on the ground, functioning as proxies of legal homogenization and isolating economic activities from the contingent exercise of national public authority (Ferrando, 2014). This opens a door for a possible re-internalization of ‘externalities’ of production – of aspects of the production process that have nothing to do with product quality standards, such as labour rights and environmental standards. In other words, while the fragmentation of global production initially enables divorcing value accumulation from liability for wrongdoing, the ‘drivenness’ of value chains by lead firms entails at least the theoretical possibility that such firms assume broader forms of regulatory capacity with regard to distanced stakeholders – workers along the supply chains and various local communities.