MNE’s Business Model, Governance & Relational Condition, and Suppliers’ Capability Development: A Comparative Study on Cross border Dyads

Research on global value chains (GVCs) and international business highlight supply-side governance and functions in explaining suppliers’ capability upgrading, downplaying the influence of demand-side activities and strategies, particularly the business model that buyers pursue in their respective markets. These business models eventually influence the governance and relational dynamics between buyers and suppliers. Using a comparative and in-depth embedded case study approach, our study examines two apparel MNEs from Sweden and Denmark and the four key suppliers of these MNEs. We conducted focus-group interviews and a baseline study of fifty suppliers from Bangladeshi apparel industry, exploring how variations in buyers’ business models impact the nature of governance and relationships between buyers and suppliers. Such variations contribute to variable capability development in suppliers’ companies particularly in five areas: ‘planning’, ‘product development’, ‘production management’, ‘compliance & sustainability’, and ‘internationalization’. Our study, for the first time, highlights the importance of considering business models in explaining suppliers’ upgrading and capability development. We contribute to MNE strategy and supplier capability literature by presenting a logical connection between buyers’ business models (i.e. demand-side analysis), governance, and suppliers’ capability development (supply-side) in cross-border context.