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Emerging market governments are incented to attract global value chain (GVC) activities to fuel economic growth. At the same time, in light of real and perceived workplace-related injustices within emerging markets, GVC lead firms are under pressure to improve social standard compliance within their upstream supply chain. Among the most common approaches to achieve these outcomes is to impose standards of conduct that are vetted by on-site audits. Research has shown, however, that improvement in GVC performance using this approach has been slow and sometimes leads to negative consequences, leading us to our research question: under what conditions do interventions by GVC lead firms yield significant improvements in social standards among upstream supplier workplaces? We hypothesize that a country’s institutions not only have direct effects on social upgrading but also indirectly affect the ability of third parties to bring about social compliance. Our findings, based on two longitudinal datasets, suggest that GVC lead firms must account for the unique country-level institutional pressures that either propel or hamper improvement over time in private social standard compliance among upstream suppliers. In addition, governments must develop new policy responses to target the prevailing institutional pressures that dampen social upgrading if they are to attract and retain GVC investment.

According to the Reading School of International Business – pioneered by scholars such as John Dunning, Alan Rugman, Jean-Francois Henn art, and Alain Verbeke – multinational enterprises (MNEs) deliver a net benefit to society through the value they directly and indirectly create for various stakeholder groups when venturing abroad. Specifically, by recombining firm specific advantages (FSAs) with location-bound country-specific advantages across international borders, MNEs generate significant economic and social benefits for host countries, local communities, and global consumers alike. By relocating and coordinating production and innovation activities across both organizational and geographic borders, MNEs can fully leverage country-specific comparative advantages across the globe, thereby creating a pathway towards sustainable competitive advantage. All in all, the Reading tradition advances a positive view of MNE activity by focusing on how cross-border FSA recombination underpins MNEs’ ability to create value.What the Reading School is missing, I think, is a more formal and rigorous examination of the risks, hazards, and other negative externalities that MNEs are exposed to – specifically within the context of their global value chains (GVCs) – when venturing abroad. Since the 2020 Covid pandemic, these risks, hazards, and negative externalities have only intensified, and in this increasingly volatile, uncertain, complex, and ambiguous (VUCA) world, the inherent fragility and vulnerability of interconnected GVCs has been put on full display. MNEs face height enedreputational hazards (e.g., brand damage due to human rights violations along their GVCs),transactional hazards (e.g., contractual risks arising from partner opportunism in cross-border collaborations), and operational hazards (e.g., global supply chain disruptions due to exogenous shocks), each of which jeopardize the willingness and capability of MNEs to venture abroad. My thesis therefore consists of three manuscripts that collectively address the following three questions: 1. How can MNEs reduce their exposure to reputational hazards along their GVCs?2. How can MNEs reduce their exposure to transactional hazards along their GVCs?3. How can MNEs reduce their exposure to operational hazards along their GVCs?