Interfirm Transformative Capacity Within Global Value Chains

How do global value chains (GVCs) affect a firm's innovation impact? Working as international communities, GVCs are rich in knowledge and resource interchange. The prior literature has focused on knowledge absorbing or internal knowledge transfer within firms for in-house innovation. However, scant research has focused on promoting innovation across interfirm networks in a GVC context. This article develops a new concept of interfirm transformative capacity as a firm's ability to transfer developed technology knowledge across time, space, and firm networks. In this article, we explore three mechanisms of interfirm transformative capacity in GVCs: 1) choosing knowledge intermediaries, 2) transmitting and maintaining knowledge over time and space, and 3) reactivating and synthesizing knowledge. We predict that engagement in a lead firm's GVC, structural holes, and network centrality will affect a focal firm's innovation impact as a result of interfirm transformative capacity. Integrator suppliers have higher innovation impacts than modular suppliers. To test these three mechanisms, we build a novel dataset from a five-year panel of Apple suppliers and their patent impacts. The results support our hypotheses related to the mechanisms of interfirm transformative capacity. Our theoretical elaboration and empirical findings have significant implications for innovation policy within, and governance of, GVCs.