Articles: Making global value chains visible: Transnational corporations versus domestically owned firms

Abstract

This paper aims to advance research on transnational corporations (TNCs) and international business policy by identifying the role and influence of foreign-owned TNCs in global value chains (GVCs) compared with those of domestically owned firms. We do this by dividing the topology of trade in value added (TiVA) into three networks composed, respectively, of traditional trade, simple GVC trade and complex GVC trade, based on the OECD intercountry input-output data for 2005–2016. Our empirical results show that China’s domestically owned firms have not only been supply centres of manufacturing value added, but have also risen as new regional centres of both supply and demand for services through simple GVC networks. Domestically owned firms of the United States dominate GVCs in services as a global center for both demand and supply, especially in complex GVC networks. TNCs located in Germany and the United Kingdom have a dominant presence in providing value added in manufacturing and services, respectively, through complex GVC networks. By making GVCs visible through TiVA-based network analyses, this paper significantly extends the understanding of who dominates what types of GVC. This will help policymakers better monitor and enhance their GVC governance and competitiveness strategies in more flexible and diversified ways.