Variety of Innovation in Global Value Chains

This article analyses how the geography and organization of preand production stages in GVC contribute to lead firms' innovation development. A novel approach in GVC studies is introduced based on transaction cost economics (TCE) and the innovation strategy's Modularity-Maturity matrix. The combination of these two perspectives allowed the conceptualization and assessment of two key dimensions in the generation of innovation in GVC: the geographic dispersion of value chain stages and lead firms' control over operations. The study of the intersection of the two dimensions led to the identification of four distinct innovation models in GVC. Evidence from four global manufacturing industries pharmaceuticals, bicycle, design furniture and wine suggests that lead firms' innovation capabilities and product innovation cycle are shaped by the specific structure of the GVC wherein they operate.