Escaping the Exploitation Trap of Power-Disadvantaged Firms in Asymmetric Networks: A Study of Vietnamese Contract Manufacturing Exporters in Buyer-Driven Global Value Chains

<p>This study investigates how power-disadvantaged firms in power asymmetric networks can improve their performance. Drawing on theoretical insights from the Resource-Based Theory and the Resource Dependence Theory, the proposed model suggests that when participating in power asymmetric networks, the exploitation strategy of power-disadvantaged firms affects their exploration strategy. While these two strategies are related, their influences on performance through firm competitive capability are different. Exploitation strategy negatively impacts firm competitive capability whereas exploration strategy positively impacts firm competitive capability. The model further posits that the impact of exploitation and exploration strategies on competitive capability depends on absorptive capacity of the firm. The model is tested on Vietnamese contract manufacturing exporters who participate in buyer-driven global value chains, where the exporting firms are dominated by powerful international buyers. The study employs a mixed-methods approach to test the proposed conceptual model. Survey data was collected from a sample of 154 Vietnamese contract manufacturing exporters following the drop-and-collect method. At the same time, ten semi-structured interviews were conducted with key informants from top management teams of Vietnamese contract manufacturing exporters to seek contextual details for the enhancement and triangulation of the survey findings. The survey data were analysed using the partial least square structural equation modelling technique, whereas the interview data were examined using theoretical thematic analysis. The results broadly support the proposed model for Vietnamese contract manufacturing exporters. The findings of this study indicate that power-disadvantaged firms in power asymmetric inter-organisational networks benefit from the dual practice of exploitation and exploration strategies. The study shows that exploitation strategy motivates exploration strategy in this type of interfirm linkage. This motivation is primarily shaped by the power imbalance structure. This finding confirms the explanation for the behaviour of power-disadvantaged firms in asymmetric relationships advanced by the Resource Dependence Theory. Moreover, the study also contributes to the Resource-Based Theory by emphasising the critical role of competitive capability in explaining firm performance. Competitive capability is found to mediate the relationships between exploitation strategy, exploration strategy and firm performance. Furthermore, the links between exploration strategy and competitive capability act as serial multiple mediators transmitting the influence of exploitation strategy on performance. In addition, the influences of exploitation strategy and exploration strategy on firm competitive capability are found to be intensified by firm absorptive capacity. Thus, an alignment of exploitation strategy, exploration strategy, competitive capability, and absorptive capacity enhances the performance of contract manufacturing exporters in buyer-driven global value chains.</p>