The Governance Mechanism of Global Value Chain: A View of Rent Theory

In the era of economic globalization, it is no longer a matter of whether or not to participate in global economies, but how to do so in a manner that provides sustainable development for the key actors within global value chain (GVC). By identifying the contexts and essence of GVC, this paper proposes a set of governance mechanism, which differs from both the invisible hand as market price mechanism and the visible hand as organizational administrative mechanism. This paper also suggests that the notion of economic rent is a key to better understand the dynamics and governance mechanism of GVC, which per se reflects sustained competitive advantage throughout the chain. The paper concludes with a discussion of how governance in GVC can inform policy and illustrate for future research.