Enforcing higher labour standards within developing country value chains: consequences for MNEs and informal actors in a dual economy

Narula, R. ORCID: https://orcid.org/0000-0002-4266-2681 (2019) Enforcing higher labour standards within developing country value chains: consequences for MNEs and informal actors in a dual economy. Journal of International Business Studies, 50. pp. 1622-1635. ISSN 1478-6990 doi: 10.1057/s41267-019-00265-1

Abstract/Summary

The 2013 Rana Plaza disaster led external stakeholders to insist on higher labour standards in apparel global value chains (GVCs). Stakeholders now expect MNEs to take ‘full-chain’ responsibility. However, the increased monitoring and enforcement costs of a large network of suppliers have been non-trivial. MNEs instead implement a ‘cascading compliance’ approach, coupled with a partial re-internalization. Elevated costs are further exacerbated in developing countries where the informal and formal sector are linked, and cost competitiveness greatly depends on this duality. Monitoring actors in the informal sector is difficult, and few informal actors can achieve compliance. GVCs have therefore reduced informal sector engagement by excluding non-compliant actors and investing in greater automation. By seeking to strictly enforce compliance, MNEs are attenuating some of the positive effects of MNE investment, particularly the prospects for employment creation (especially among women), and enterprise growth in the informal sector. I discuss how these observations might inform other cross-disciplinary work in development, ethics, and sociology. Finally, I note implications for IB theory from the disparities between the ownership, control and responsibility boundaries of the firm.

Item Type	Article
URI	https://reading-clone.eprints-hosting.org/id/eprint/84144
Identification Number/DOI	10.1057/s41267-019-00265-1
Refereed	Yes
Divisions	Henley Business School > International Business and Strategy
Publisher	Palgrave Macmillan
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