MNE Strategies for Sustainable Supplier Upgrading: Business Model and Governance Microfoundations in GVCs

Sustainability transitions in global supply chains have become a strategic imperative for multinational enterprises (MNEs). Yet, little is known about the mechanisms through which business models shape governance and supplier capability development, or how MNEs’ varying strategic approaches to sustainability transitions rooted in business models lead to different forms of capability upgrading in global supply chains. This study, thus, examines how MNEs business models influence governance modes with suppliers and drive capability upgrading, resulting in distinct sustainability strategies. Drawing on a longitudinal, comparative, and embedded case study of Swedish and Danish fashion MNEs and their supply chains in Bangladesh, and adopting a microfoundational lens, the analysis uncovers two contrasting business model logics and governance modes that pursue different sustainability pathways. Market-driving MNEs foster collaborative governance, while market-driven MNEs rely on auditory governance. These governance modes underpin two sustainability strategies: embedded sustainability—where sustainability is integral to the organizational core (“being good by being sustainable”)—and sustainability-driven—where sustainability is deployed as a strategic lever (“doing well by doing good”). These orientations shape supplier capability upgrading in planning, product development, production, and sustainability management. By elucidating the micro-foundations of business models, governance mechanisms, and supplier relationships in sustainability transitions, this study explains why MNE's global supply chains exhibit variable capabilities and sustainability outcomes, thereby extending global value chain (GVC) frameworks and contributing fresh insights at the intersection of international business and GVC research.<br/> <br/>