Manufacture upgrade and interfirm relationship development: the case of electronics firms in the Pearl River Delta

Abstract

Despite significant economic benefits of manufacture upgrade from original equipment manufacturing, through to original design manufacturing to own brand manufacturing, research on interfirm relationship development during the process of manufacture upgrade has remained underdeveloped. This article examines different types of interfirm relationships and their impact on manufacture upgrade using case studies of electronics firms located in the Pearl River Delta. The findings suggest that three iterative processes support relationship development: resource seeking, learning and networking. These processes influence relationship development for both vertical and horizontal relations through trust-based personal relationships. In particular, the insights provided by relational view of interfirm relationships appear to complement and support economic goals of governance mechanisms.

Keywords:

• interfirm relationship development
• manufacture-upgrade
• OEM/ODM/OBM

Notes

1. Absorptive capability refers to the ability to recognise and value new knowledge, ability to assimilate new knowledge, and ability to commercialise new knowledge (Cohen and Levinthal 1990).