Governance Patterns in Value Chains and their Development Impact

Production by order of a lead firm that ‘governs’ its value chain by defining and enforcing standards without aspiring to gain ownership control of its suppliers is becoming a dominant form of industrial organisation. This trend has far-reaching consequences for developing countries, among others, affecting the degree of inclusion of poor producers, their income earning opportunities, the allocation of risks, and consumer prices. This paper serves a triple purpose. First, it tries to disentangle the multiple factors that determine the concrete form of value chain governance; second, it proposes a framework for the analysis of the developmental impacts of these different forms of value chain governance; and, third, it derives policy conclusions from this analysis.