The purpose of this research is to understand how power relations in global value chains (GVCs) shape the upgrading of offshoring service providers (OSPs). More specifically, the chapter addresses two questions: (1) How power asymmetry in GVC shapes the upgrading prospects for OSPs? and (2) How OSPs manage the power asymmetry in GVC and upgrade to a more favorable position?

The context for this study is the software value chain. Drawing upon relational economic geography and GVC literature, we build an analytical framework based on three conceptual building blocks: client power, upgrading, and upgrading practices. Based on the analytical framework and in-depth interviews, we design a case study of one OSP in the Pakistani software industry, referred to as OSP#A.

The findings reveal that GVCs exercise a high level of power on OSPs. This power is exercised through enforcing certain conditions to participate and coordinate in GVCs. However, it is found that OSP#A is not passive recipient of these demands. Instead, it actively manages the power asymmetry through building practices to adapt and collaborate in GVCs and attain relational proximity.

The chapter highlights the significance of upgrading practices and conceptualizing upgrading as a process of improving relational power in GVCs by attaining relational proximity.