Go Global or Stay Local? Understanding How Fiscal Incentives Reshape Supply Networks

Abstract

This study investigates the way firms reconfigure their supply base and reshape their production network to capture value from Free Trade Zone incentives to capture value from incentives. Six production networks located in Manaus, Brazil are analyzed using the Global Production Network framework and factors related to plant type and supplier relationships. A multiple case study was conducted. Data was collected using in-depth semi-structured interviews administered in loco, and the selected the firms were leaders in three different industries: transportation, mechanical assembly and chemicals. The results indicate that, if effectively applied, incentives can impact production network configuration from an embeddedness perspective, causing a firm to change its strategic role. Based on the analysis, we propose five propositions that challenge the relationships among autonomy, value creation, plant types and levels of embeddedness. The propositions are particularly useful for suppliers and distributors, as well as public agencies, including infrastructure providers and policymakers.

Keywords

• facility location
• supply network design
• supplier management
• free trade zones
• global production network