Abstract
This paper develops a conceptual framework that explores the linkage
between the evolution of global production networks (GPN), the role
of network flagships in transferring knowledge, and the formation
of capabilities by local suppliers. GPN are a major innovation in
the organization of international business. These networks combine
concentrated dispersion of the value chain across the boundaries
of the firm and national borders, with a parallel process of integrating
hierarchical layers of network participants. The network flagships
transfer both explicit and tacit knowledge to local suppliers through
formal and informal mechanisms. This is necessary to upgrade the
local suppliers’ technical and managerial skills, so that they can
meet the flagships’ specifications. We also examine how GPN can act
as mediators in the capability formation of local suppliers.
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