How Do Family Firms Orchestrate Their Global Value Chain?

The global value chain (GVC) is a critical determinant for any firm pursuing a competitive advantage in the global arena. The Global Factory model (Buckley & Ghauri, 2004) conceptualizes the way large multinational enterprises (MNEs) orchestrate their GVC, theorizing that firms should minimize their costs by internalizing knowledge-intensive activities and outsourcing their operations. However, as this model is based on a cost-driven approach aimed at maximizing financial goals and often the captive control of suppliers, it scarcely applies to family firms, largely driven by socioemotional considerations that go well beyond a mere efficiency logic. In this study, we thus revisit the Global Factory model by contextualizing it in the family firm domain. We contend that the distinctive characteristics of family firms influence the design and governance of their GVC by fostering vertical integration—limiting outsourcing to those activities that are difficult or impossible to internalize (e.g., due to lack of raw materials)—and relational control. Our conceptual investigation sheds light on the idiosyncrasies of family firms’ international behavior, showing that their approach may be financially counterproductive in the short-term but able to generate benefits in the long term.