Decoding the digital leap: Exploring the role of global value chains in driving country-level digitalization

Abstract

This study employs a dynamic bootstrap corrected fixed effects model to investigate the impact of Global Value Chain (GVC) participation and its components (forward and backward participation) on digitalization across 47 economies from 2001 to 2018. The findings indicate that GVC participation significantly enhances digitalization in countries with lower economic growth by facilitating access to advanced technologies and global networks, thereby accelerating their digitalization efforts. Conversely, in countries with higher economic growth, the effects of GVC participation on digitalization appear negligible, suggesting that these economies may already possess robust digital infrastructures. Notably, backward participation hinders digitalization in lower-growth countries, whereas it positively impacts higher-growth countries. Forward participation, however, distinctly benefits digitalization in lower-growth economies but does not show significant effects in more advanced ones. These nuanced outcomes underline the importance of tailoring policy interventions to the specific economic context of a country. Policymakers are recommended to support GVC integration in developing economies as a strategic approach to boost digitalization, while in more developed economies, policies should focus on enhancing existing digital capabilities and innovation ecosystems. This study's insights advocate for nuanced, context-specific policies to leverage GVC participation as a digital transformation and economic development catalyst.