Quality standards, conventions and the governance of global value chains

Abstract

Convention theory helps refine our understanding of the governance of global value chains through its analysis of ‘quality’. In this article, it is argued that global value chains are becoming increasingly ‘buyer-driven’, even though they are characterized by ‘hands-off’ forms of co-ordination between ‘lead firms’ and their immediate suppliers. This is because lead firms have been able to embed complex quality information into widely accepted standards and codification and certification procedures. As suggested by convention theory, their success in doing so has depended on defining and managing value chain-specific quality attributes that are attuned to broader narratives about quality that circulate within society more generally.

Keywords:

• global value chains
• convention theory
• governance
• quality
• standards

Acknowledgments

Previous versions of this paper were prepared for the international workshop ‘Africa – Value Chains – Globalisation’ (Copenhagen, 29–30 November 2002) and the conference ‘Conventions et institutions: approfondissements théoriques et contributions au débat politique’ (Paris, 11–13 December 2003). We should like to thank all those who provided feedback on these two drafts. We are particularly indebted to Lars Buur, Benoit Daviron, Florence Palpacuer and Lisa Richey for their comments. The research programme on the basis of which this article was generated was funded by the Danish Social Science Research Council and the Danish Council for Development Research.

Notes

Stefano Ponte and Peter Gibbon, Senior Researchers, Danish Institute for International Studies, Standgade 56, 1401 Copenhagen K, Denmark.

Comparisons between the two traditions are drawn in Wilkinson (1997) and Raikes et al. (2000). Attempts at using convention theory to enrich other approaches have been carried out in relation to global value chains (Daviron and Gibbon 2002; Daviron and Ponte forthcoming) and agro-food networks (Barham 2002; Busch 2000; Busch and Tanaka 1996; Freidberg 2003; Murdoch and Miele 1999; Murdoch et al. 2000; Raynolds 2002, 2004; Renard 2003). An assessment of convention theory applications in agro-food studies can be found in Daviron and Ponte (forthcoming) and Gibbon and Ponte (in press).

Benoit Daviron, personal communication.

See Nadvi and Wältring (2002) for other kinds of classifications of standards.

Functional leadership refers to the position of dominance of a particular group of firms in a specific functional position (or positions) in the chain. It is thus different from leadership of a particular firm over competitors within a specific function.

Originally, the literature referred to the term ‘commodity chain’. Recently, this term has been abandoned and was substituted by the ‘value chain’ concept. The latter is thought to better capture a wider variety of products, some of which lack ‘commodity’ features. As a result, the global commodity chain (GCC) approach is now known as ‘global value chain’ (GVC) analysis. The concept of ‘value chain’ has been known in the literatures on industrial organization, business studies and management for a while. Porter's (1985, 1990) concept of value chain emphasizes the inter-connected and sequential nature of economic activity, in which each link adds value in the process. His notion of value chain, however, is designed primarily as a heuristic tool to allow individual firms to understand which ‘in-house’ and external ‘steps’ their activities depend upon, and how they can improve their competitiveness by co-ordinating these steps more effectively. By contrast, the political economy use of ‘GVC’ takes its point of departure not in the activities surrounding a specific firm, but in the full range of activities that are required to bring a specific product from its conception to its end use and beyond. The concept of ‘global value chain’ refers to configuration of activities that are divided among firms and that have a global geographical scale.

Along with the ‘production network’ and ‘commodity system/networks’ literatures (Dicken 2003; Henderson et al. 2002; Ernst 2000; Friedland 1984, 2001; Hughes 2000, 2001; Smith et al. 2002), GVC analysis focuses on more explicit structural elements of production, distribution and consumption rather than on the social/cultural/symbolic relations among actors (Appadurai 1986; DuPuis 2000; Granovetter 1985; Marsden et al. 2000; Murdoch et al. 2000).

Related discussions have taken place on the links between forms of governance and upgrading (Gibbon forthcoming; Humphrey and Schmitz 2002a), the relationship between global value chains and industrial clusters (Humphrey and Schmitz 2002b; Nadvi and Halder 2002; Palpacuer and Parisotto 2003), and learning processes and supply relations within GVCs (Schmitz and Knorriga 1999; Humphrey 2003b). A more explicit effort has also been made to link issues of governance and upgrading with overall regulatory structures (Gibbon forthcoming; Kessler 1999; Gereffi et al. 2002; Ponte 2002a, 2002b), with processes of globalization and international inequality (Talbot 2002; Kaplinsky 2000) and with corporate concentration (Vorley 2003). Finally, there is an emergent literature analysing the links between value chains, standards and ethical trade issues (Ponte 2002c; Barrientos et al. 2003; Messner 2002; Nadvi and Wältring 2002; Quadros 2002; Vorley et al. 2002). In terms of sector coverage, the early literature was mainly concerned with manufacturing and high technology; these have now been accompanied by case studies on agro-food commodities, services, transport and logistics.

We owe this observation to Florence Palpacuer.

Inter-subjective and cognitive elements are also key preoccupations of evolutionary political economy (Fullbrook 2002; Hodgson 2002; Nielsen 2001). Salais and Storper's work (Salais and Storper 1992; Storper and Salais 1997), in particular, provides a conceptual bridge between analyses focused on tacit and codified knowledge (drawing on Polanyi 1966) and convention theory through the analysis of ‘worlds of production’ (see applications in Murdoch and Miele 1999; Murdoch et al. 2000).

In some of the literature on conventions, a distinction is made between ‘convention economics’ and ‘convention theory’ as such. The distinction is also sometimes portrayed in terms of a ‘strategic approach’ versus an ‘interpretative approach’ to conventions (Batifoulier 2001). The former is said to be inspired by an ‘instrumental’ view of conventions as co-ordinative actions that are motivated by personal interest and are based on the expectation of reciprocity. This has led to contributions engaging critically with game theory and that see convention as the result of strategic interaction. The latter is said to be inspired by a ‘normative’ view of convention as a custom whose validity is approved within a group and is guaranteed by general approbation. Convention in these terms is distinct from the rule of law on the basis of the different nature of sanction: rather than needing a juridical system of coercion, non-conformity entails the risk of something akin to a ‘social boycott’. This approach to conventions sees them as ‘models of evaluation’ that allow the interpretation of rules (Batifoulier and Larquier 2001). In this article, we refer to ‘convention theory’ as the ‘interpretative approach’ to conventions. Therefore, we draw mostly from the interpretative literature and speak to its main preoccupations. Selected examples of the ‘strategic approach’ to conventions (or ‘convention economics’) can be found in edited collections by Batifouier (2001: 3rd part), Orléan (2004) and Favereau and Lazega (2002).

In Salais and Storper (1992), the four ‘worlds of production’ are the result of the combination of two dimensions that can take two values: the first dimension is related to the available supply of technology, information and skills at the production level, and whether these are restricted to a community of specialists or not (yielding specialized or standardized products respectively); the second dimension is related to whether demand is anonymous and uniform or not (yielding demand for generic or dedicated products respectively). The four possible combinations lead to a classification of ‘worlds of production’ as follows: (1) industrial world (production of standardized-generic products); (2) network market world (standardized-dedicated); (3) Marshallian market world (specialized-dedicated); and (4) world of innovation (specialized-generic) (slightly different labels are used in Storper and Salais (1997)). In this paper, we draw implicit inspiration from Salais and Storper's work when we separate the discussion of quality conventions from conventions on corporate organization and inter-firm relations. However, we do not use their ‘world of production’ categories, whose features are too product-centred and pre-determined by a series of given factors that are only loosely linked to historical and regulative processes.

‘Spirit of capitalism’ is defined as ‘the ideology that justifies people's commitment to capitalism, and which renders this commitment attractive’ (Boltanski and Chiapello 2002).

Callon and collaborators actually refer to lead firms as ‘suppliers’, because their reference point is consumers. To avoid confusion, we have corrected this in the exposition above.

On the limitations of the ‘economy of qualities’ approach, of global value chains analysis and the possible overlaps between the two, see Thompson (2003: 208).

One of the critiques of GVC analysis has been that it normally stops at the retail level, and thus is largely silent on issues of consumption and after-use disposal/recycling. Some insights can be drawn from the literatures on consumption and on production–consumption links in agro-food studies. Much of the latter was a reaction to the perceived ‘productionist’ bias of commodity systems analysis (as in Friedland (1984) and related contributions). Even the literatures on ‘systems of provision’ (Fine et al. 1996; Fine 2002), food retail (Marsden and Wrigley 1995), and the construction of quality in food networks (Arce and Marsden 1993; Murdoch et al. 2000) have been taken to task for not investing enough ‘agency’ in consumers (Goodman 2002). Yet, attempts to overcome this limitation (Lockie and Kitto 2000; Lockie 2002) seem to arrive at conclusions similar to those highlighted by Callon et al. (2002), namely that, through the application of technologies of knowledge such as market research, survey data and point of sale information, the consumer is made ‘knowable and governable’ and thus subject to manipulation (Lockie 2002).

Due to space limitations, we cover only the case studies of clothing and coffee here. Other empirical GVC work on quality issues can be found in relation to citrus, cocoa, cotton and fresh vegetables (see Fold and Larsen forthcoming; Dolan and Humphrey 2000).

A further step may be taking place in the direction of ‘control of control of control’: the International Social and Environmental Accreditation and Labelling (ISEAL) Alliance has recently published a ‘code of good practice for setting social and environmental standards’ (see www.isealalliance.org).

In an unpublished paper from 1998 recently referred to by Murdoch et al. (2000), Thévenot distinguishes domestic and ‘public’ conventions. The latter are said to encompass brands, trademarks and packaging. Since this does not appear to be referred to by him previously or subsequently, the status of this distinction is not clear.

This is becoming the case for at least part of the mainstream coffee market, against a background of a collapse of quality control in several coffee-producing countries (Ponte 2002c). It has been the case for a long period for so-called ‘commodity’ clothing items, such as men's socks and boxer shorts, to which it is difficult to attach ideas of personal differentiation, allure or fulfilment.

For a conceptual critique of the moral and functional claims of ‘shareholder ideology’, see Engelen (2002).

On the role of interior designers and high-street flower bouquet designers in relation to quality in the cut flower industry, see Hughes (2001).

Additional information

Notes on contributors

Stefano Ponte

Stefano Ponte and Peter Gibbon, Senior Researchers, Danish Institute for International Studies, Standgade 56, 1401 Copenhagen K, Denmark.