Value Chain Governance
Value chain governance can be defined as the term and enforcement of instructions relating to product design, process controls and timing. Governance plays an important role because of greater demand for non-standard products, risk reduction, economies of scale and the availability of sanctions. There are three different forms of economic governance, including markets, networks and hierarchy (Humphrey & Memedovic, 2006). Standard products are frequently transacted through markets because they do not require information transferring. However, niche or highly-differentiated products are transacted via networks or hierarchies depending on the competence of suppliers and the availability of information about the quality and characteristics of products (Prowse, 2012). Network coordination can be implemented in three forms, consisting of relational linkages (strategic partnerships with a degree of inter-reliance), captive linkages (small upstream are reliant on larger downstream buyers), and modular linkage (the customization of products occurs without substantial interactions or investment in specific assets) (Humphrey & Memedovic, 2006).