The Dominant Presence of MNES in Agro-Food GVCs: Implications for the Developing Countries

What is it about?

We make some tentative observations about the role of MNEs in agro-food GVCs, paying special attention to the potential for actors from developing countries to engage as suppliers within these networks. We highlight that the shift away from fully-internalized MNE subsidiaries to non-equity modes (NEMs) and more arm’s-length linkages with suppliers in host developing countries depends crucially on two factors. First, domestic actors need to be formally organized sector, with access to financial and knowledge capital. Second, the host economy needs to be able to make available the appropriate location (L) advantages that create the conditions that allow MNEs to engage with domestic firms. This means developing stable and consistent institutions that permit MNEs to enforce contracts and reduce shirking costs, in addition to the necessary infrastructure associated with public goods. Unfortunately, most developing countries—while well-endowed with natural resources—are deficient in both domestic actors with O advantages and the necessary L advantages.

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