Knowledge dependence in global value chains

Abstract

How can suppliers leverage global value chains (GVCs) to enhance innovation impact and capture value? We conceptualize GVCs as distributed innovation systems (DIS) that facilitate the dispersion and flow of knowledge among diverse actors within the chain. This dynamic fosters knowledge dependence among GVC actors, reshaping the innovation process and influencing both innovation outcomes and value capture. By examining suppliers' knowledge dependence on a lead firm such as Apple, and on other suppliers, we identify a positive relationship between knowledge dependence and suppliers' innovation impact. Additionally, we introduce the moderating role of the ease of knowledge combination, demonstrating how it interacts with knowledge dependence to influence innovation outcomes. Our findings reveal that focal suppliers achieve greater innovation impact when they develop knowledge dependence on a lead firm or other GVC suppliers. We uncover an inverted U-shaped relationship between knowledge dependence on a lead firm and focal suppliers' value capture, indicating that optimal outcomes occur when suppliers maintain a balanced level of dependence. However, we find no evidence of a positive relationship between focal suppliers' value capture and their knowledge dependence on other suppliers. These findings advance understanding of knowledge dependence, distributed innovation, and value appropriation within GVCs.