chapter  6
Towards a theory of network orchestration
WithPeter Hertenstein
Pages 28

Chapter six draws the conclusions from the case study findings for the economic theory of governance. Some of the lead firms have accumulated enormous power to influence other firms in the industry, at times extending their orchestrating activities even beyond the first tier of suppliers. Less powerful firms participating in global value chain are increasingly becoming dependent on the leading multinational and have to follow the strategic direction set by the lead firm. Contemporary theory of economic governance struggles to explain the degree of power and the reach of the orchestrating activities by powerful lead firms. Hence, a new theory is proposed that helps to understand the orchestrating activities of lead firms based on power asymmetries between the involved firms. Rather than the contract as the mechanism for governance, it is a firm’s power in relation to another firm that enables it to influence the future direction of the other firm.