Global value chain governance dynamics A co-evolutionary perspective on the transition from relational to modular governance in Construction

Abstract

Global value chain (GVC) governance theory explains how GVCs are controlled and organised. A large body of research examines how GVC governance varies across industries, however, GVC governance dynamics within industries receive less attention. Across both GVC and IB fields, current empirical and theoretical research does not adequately explain the process of transition between governance structures; nor the potentially related factors that may give rise to heterogeneity of governance types within an industry. This study bridges the gap between GVC and international business theories to focus on GVC governance heterogeneity as a source of competitive advantage. The objective of the dissertation is to develop a stronger empirical and theoretical understanding of how and why GVC governance transitions occur, focusing on dynamics in governance associated with digitalisation in construction GVCs.

Theory predicts that construction GVCs will transition from ‘relational’ to ‘modular’ forms of governance when the ability to codify information extends to the industry’s complex products. Relational governance arises in GVCs delivering complex products where coordination between actors relies on exchange of tacit information. Modular value chains are expected to arise when the ability to codify information extends to complex products. Technologies such as digital engineering and building information modelling (BIM) were widely anticipated to disrupt the construction industry and unlock such a transition. Similar transitions have been observed in automotive and aviation industries. Yet construction continues to rely heavily on relational exchange, to face high levels of litigation, and to lag in cross-industry indices for productivity and digitalisation.

Through mixed-methods including grounded theory, structural equation modelling, and comparative case studies, the research reveals the dynamic interplay between network-orchestration and network-dependence, as lead firms navigate GVC governance transitions. Analysis of data from over 1270 construction GVCs supports theory development alongside insights that can help managers optimise complex GVC governance structures, particularly in the context of digitalisation.