How Do Emerging Economy Firms Learn to Evolve from Contract Manufacturing to Own Brand Management?

The rise of offshore outsourcing, particularly in the automobile and the consumer electronics industry has become a key strategic issue in gaining global competitive advantages. Firms in emerging economies often play an important role as original equipment manufacturers that supply branded international producers. Importantly, such contract manufacturing has moved beyond simple supplying components to the complicated manufacturing of entire products. The evolution of global supply chains has become a particular concern for branded market leaders when these emerging economy firms aspire to move up the value curve to build their own brand. To move from original equipment manufacturing (OEM) to own brand management (OBM), these firms require path-breaking capabilities that emphasize innovation rather than efficiency. These firms have to acquire a different type of knowledge and set of capabilities toward such transformation. Such knowledge and capabilities are available not only through learning from their buyers but also internally from their subsidiaries, which mostly reside in advanced economies, as commonly seen for firms originating from Taiwan and mainland China (Alcacer & Oxley, 2014; Horng & Chen, 2008; Kang et al., 2009).