Why apparel suppliers are locked into the upgrading ladder in Bangladesh: an institutional and business systems perspective

Research drawing on the global value chain (GVC) literature highlights how industries/firms upgrade on the technical, social and functional ‘ladder’; however, studies have ignored why firms in a particular industry are locked into a particular stage on the upgrading ladder. Using a firm- and institutional-level analysis, our study investigates a critical case from the Bangladeshi garment industry and explores the reasons, rooted in institutions and the business system, that cause firms to become ‘locked in’ at a particular stage of the upgrading ladder. We analyse the nature of the institutions and business systems of Bangladesh and examine how the characteristics of institutions and business systems affect firms’ lock-in. Our study explores four causes of ‘lock-in’: i) a lack of socially-constructed entrepreneurial vision (i.e. focusing on multiple venture creation, political affiliation and power, supply and manufacturing capacity and profit maximization) and ii) ownership and management characteristics, which do not support upgrading to own brand manufacturing (OBM), iii) the nature of governance between buyers and suppliers, and iv) inconsistency in institutional characteristics. The latter issue is seen, for example, in low levels of trust between firms, a lack of government incentives for design lab development and brand internationalisation, inadequate management of bank financing for upgrading, a lack of intermediary institutions to support internationalisation, and low-quality management education. Our study contributes to the GVC and business systems literature by exploring the reasons for the ‘lock-in’ condition that existing literatures have ignored.