Value Creation and Supplier’s Capability Development in Relational Mechanism: The Case of Bangladeshi Apparel Industry

Mohammad Bakhtiar Rana, Hoque Imranul

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Extant literature inform us the relation between lead firm’s governance and suppliers’ upgrading in the global value chain. Yet, studies have not explained the upgrading mechanism of the suppliers as to what value is created and/or co-created (i.e. exchange-value & value-in-use) in suppliers firms and how that value links to suppliers’ capability development in the apparel firms. Focusing on Bangladeshi apparel industry as a context and using a comparative and embedded case study method, we investigate both the lead firms and the suppliers of H&M from Sweden and Bestseller from Denmark. Given the contrasting nature of governance, length of relationship, value of purchase and organizational vision of the two lead firms, our study investigates different sizes of suppliers and their value creation mechanism as well as capability development. Based on a focus group interview with 6 senior merchandisers from leading apparel companies and 20 in-depth interviews from six large and medium sized suppliers, study reveals that there are mainly four areas in which value is created in supplier’s organization in the relational mechanism, thus the process leads to suppliers differentiated capability development. The four areas are: (1) production capacity, (2) product development capacity, (3) occupational health, safety and compliance capacity, (4) and sustainability capacity. Study however finds that the value creation is affected by the relational conditions between buyer-supplier (e.g. support activities by buyers depend on suppliers ranking i.e. platinum, gold, and silver), the nature of buyers’ management (e.g. nature of governance and management system applied to maintain relationship with suppliers), and suppliers’ organizational capability including the absorptive capacity and entrepreneurial dynamics that emphasizes long-term sustainability. Study thus postulates that suppliers’ capability is a consequence of value creation process in relational mechanism in which buyers’ tend to drive suppliers capability, mostly indirectly, through policy issues, compliance mechanism, knowledge sharing, transaction and relationship development and strategic vision. Whilst suppliers organizational resources, vision, and absorptive capacity make the most direct contribution to supplier’s capability development, which is rooted in the institutional context.
TitelGlobal Production Conference-Singapore 2017 : Abstract publication
ForlagSingapore National University
StatusIkke-udgivet - 6 dec. 2017
BegivenhedConference on Global Production - National University of Singapore, Singapore
Varighed: 6 dec. 20178 dec. 2017


KonferenceConference on Global Production
LokationNational University of Singapore

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