Financialized sourcing practices

How does financialization shape the sourcing practices of global apparel brands and retailers?

This research stream investigates the relationship of two key processes of the modern global economy: outsourcing and financialization. It focuses on the dynamics between apparel corporations and their shareholders. The stream examines how investor preferences and capital market dynamics shape the corporate business strategies of apparel brands and retailers, including how they organize and govern apparel global supply chains. The methods of investigation include balance sheet analysis of the financial stocks and flows of the largest global apparel buyers, stock market analysis, and interviews with key informants from lead and supplier firms. Using this data, we examine whether shareholder value and ‘financialized sourcing practices’ vary based on the institutional and regulatory dynamics in the home countries of apparel brands and retailers across the US, Europe and Japan.

Publications

Shareholders as the main beneficiaries of globalized production: Corporate financialization and value capture along global value chains

Global value chain (GVC) analysis examines the distribution of value between lead firms and suppliers but overlooks profit leakage to actors outside GVCs, especially financial markets. We address this gap by integrating GVC analysis with the corporate financialization literature, examining value capture between shareholders, lead firms, and suppliers. Using S&P Capital IQ data, we analyze lead firms’ financialization of objectives, investments, operations, and value capture across four GVCs (apparel, automotive, copper, and coffee/cocoa) from 1993 to 2022. We show that GVCs serve lead firms as a “source of value” by lowering sourcing costs to increase profit margins and shareholder returns, and as a “source of liquidity,” extending supplier payment terms that enhance working capital. Overall, shareholders emerge as the main beneficiaries of GVCs. While issuing equity plays a minor role in financing lead firms, these firms sustain stock markets through large shareholder payouts, funded through the profits generated in GVCs.