While the deepening of the trade in services and goods has surely enriched global economic development in various ways, its accompanying international division of labour comes along with a widespread and ongoing violation of global labour standards. Apparently, even more so as recent decades have seen the rise of network forms in coordinating economic activities across borders. Value creation networks can be defined as three or more organizations collaborating in joint value-adding activities crossing and permeating organizational boundaries. According to institutions like OECD, WTO & World Bank Group or the UNCTAD, such value creation networks have become a global phenomenon and dominate the production and delivery of a myriad of goods and services.
At the same time, and apart from their benefits in creating employment opportunities, a high degree of uncertainty surrounds the impacts of value creation networks on working and employment standards. These are exemplified by the debates around precarious employment, contingent work and informal labour as well as their implications for societal integration through work and employment. For the functioning of labour inspection, value-creation networks combine several problems within countries and across borders: (1) in value-creation networks and supply chains multiple institutional jurisdictions are involved, (2) networks imply a plurality of governance forms and coordination types, (3) networks usually cross sectoral demarcations as well as they connect heterogeneous places. In combination with (4) huge divergence in workers’ voice between various parts of these networks, this mix provides considerable challenges to devise an appropriate labour inspection in VCN.
The accompanying challenges are not mere theoretical issues, because there are indications that work arrangements involving a multitude of organizations are at the root of remarkable network failures. In these failures, there is often a combination of low reliability in operations with a refusal to take responsibility for employment relations and a lack of accountability for network outcomes. Such failures include catastrophes like the Deepwater Horizon oil spill (e.g. Mills & Koliba, 2015) or the collapse of the Rana Plaza factory complex in Bangladesh (e.g. Donaghey & Reinecke, 2017), but also failures like the product call-backs issued regularly by manufacturers (e.g. Wowak & Boone, 2015). According to a recent study, this type of network failure may also contribute to weak responses to the Covid_19 crisis in a couple of countries where the public health care sector is plagued by chronic shortages in funding, privatization, and operational fragmentation due to subcontracting of services (Avgar et al., 2020).
Beyond a safe integration of the workflow, value creation networks cause tensions for managing employment relations sustainably because of the centrifugal consequences of organizational disintegration on the one hand, and the necessity for network participants to collaborate with one another on the other hand. These networks are likely to undermine traditional employment policies designed for single, integrated firms in quality, scope, and coverage. Above all, in value creation the quality of work and employment can be expected to differ according to the network position of the participating organizations. The integration of a larger number of more diverse groups of workers – segmented along occupations and by job status – into a networked work process is also likely to be a challenge for labour inspection (e.g. Camuffo et al., 2017; Underhill & Quinlan, 2011, Nygren et al., 2017). Problems might also exist because lead firms follow strategies that focus on reducing costs or delegate risks by subcontracting, franchising, and third-party management. Then, suppliers and service providers systematically linked into a value creation network struggle to meet the demands for cost reduction and flexibility while upholding sustainable working conditions at the same time. And, value creation networks complicate the collective employment relations, because learnt mechanisms for mediating the divergent interests of employers and workers through collective bargaining might fail. In sum, from a labour inspection perspective, value creation networks are a formidable challenge for protecting workers.
What options might be available to support labour inspection in value creation networks? The network participants might create new governance rules for dealing with these tensions. One might expect lead firms to take measures that assist the other network participants by offering explicit guidance, engage in monitoring and auditing, and issue significant penalties in case of failure. Integrating these organizationally “fissured” operations effectively under the umbrella of a lead firm’s brand means creating and enforcing standards in the VCN to avoid an undermining of the market positioning of the brand (Weil, 2019). Another option would be to assign the responsibility for designing and enforcing sustainable employment relations either to specialized staff in each network firm or to create separate organizations for that purpose. Furthermore, responsibility could be thought of as being integrated into the daily activities of line management. From an employment relations view, the choice of these organizational alternatives is influenced by labour representatives, trade unions, and employer associations bringing their own views to the table. Last but not least, there is the option to define a joint legal liability in global supply chains which make the dominant client firms responsible (Anner, Bair & Blasi, 2013, Davidov, 2015)
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