Global value chain participation: The case of emerging market new ventures

Emerging market firms play an important and growing role in global value chains (GVCs) due to their low-cost resources and responsiveness to the needs of lead firms. However, emerging market firms, particularly new ventures, are frequently disempowered in GVCs. To improve their competitive advantage and position in GVCs, they may seek broader GVC participation, which can lead to functional upgrading. However, such a strategy comes with additional complexity and demands on resources and capabilities. To understand this tension, we examine how broader GVC participation, measured by the number of types of GVC activities, relates to the performance of emerging market new ventures and suggest that social networks may enable broader participation. By using a unique, high-quality dataset collected in Vietnam over a ten-year period, our results confirm a relationship between GVC participation and financial performance but not productivity. The results also show that social networks positively moderate both relationships, albeit in different ways. We contribute to the GVC and emerging market literature by conceptualizing GVC participation in a novel way and by theorizing the effect of GVC participation on productivity and financial performance. We also contribute to the new ventures literature by explaining how new ventures from emerging markets can achieve functional upgrading through GVC participation.