Does global value chain position affect innovation performance of China’s high-tech industries?

Extant research about global value chains (GVCs) has focused on its economic effects, while the innovation effects of GVCs remain understudied, especially for developing countries. This study explores the effect of GVC involvement along two dimensions – GVC participation and GVC position – on innovation performance in China’s manufacturing industries. We also investigate the interaction effects of GVC involvement and industrial agglomeration on innovation performance. With a sample of 15 manufacturing industries in China from 2005–2015, we find that China’s manufacturing industries have substantial participation in GVCs, but they are located mainly at low positions in GVCs. In addition, the study shows strong evidence that GVC participation has an inverted U-shaped effect on innovation performance, whereas the effect of GVC position on innovation performance is positive. Finally, we find that the interaction effect of GVC position and industrial agglomeration positively influence innovation performance, while the interaction effect of GVC participation and industrial agglomeration is negative. These empirical findings have important theoretical and policy implications.

Multinational enterprises link domestic value chains and global value chains（GVCs）, so understanding their activities is fundamental to understanding GVCs. However, few studies focus on Chinese foreign-owned enterprises’ position in GVCs. In this paper, China’s industry data are divided into domestic-owned and foreign-owned enterprises, and production, trade and investment are integrated into a unified framework of GVCs. Based on the global input-output model considering heterogeneity between domestic-owned and foreign-owned enterprises, this paper constructs forward and backward production length index, analyzes Chinese domestic-owned and foreign-owned enterprises’ position and evolution path in GVCs from the perspectives of production and consumption. The results show that: Domestic-owned enterprises are in a more upstream position in GVCs than foreign-owned enterprises. Domestic-owned enterprises have a more complete production chain in China, which makes a greater contribution to domestic production and consumption. Foreign-owned enterprises have a significant proportion of the GVC production chain, with obvious export-oriented characteristics. The decomposition of forward and backward production chains show that the GVC production chain is the longest, and the traditional trade production chain is longer than the pure domestic production chain for both domestic-owned and foreign-owned enterprises. Both of them have the characteristics of “dual production structure”, i.e. the GVC production chain is more complex, and export production is more complicated than pure domestic production. From the perspective of industries, most industrial production chains of domestic-owned enterprises are longer than that of foreign-owned enterprises, and the production chain of manufacturing industry is longer than that of service industry. The pure and traditional trade production length of foreign-owned enterprises are almost equal to 1, while the pure and traditional trade production length of domestic-owned enterprises are larger than 2, which indicates that foreign-owned enterprises play a small role in domestic production, and the upgrading of domestic industrial structure mainly depends on the production and consumption of domestic-owned enterprises. From the perspective of evolution path, most domestic-owned enterprises evolve along path 1 in GVCs, with longer production length and closer industrial links, while most foreign-owned enterprises evolve along path 2 and path 4 in GVCs, indicating that they are outflowing from China. Therefore, domestic-owned enterprises should further strengthen the separation of functions and spaces, and be more actively embedded in GVCs; China should care about the manufacturing industry which could drive and promote its upstream and downstream industries, and not abandon the processing manufacturing industry and turn to the high-tech or modern service industry blindly; it should also maintain the consistency of trade and industrial policies, and guide foreign investment in China in a rational way.

This study empirically examines the impact of formal and informal environmental regulation (ER) on China’s manufacturing global value chain (GVC) position and tests the threshold and moderating effects of export comparative advantage (ECA). The results reveal, first, that the influence of formal ER on China’s GVC position shows a U-shaped relationship, while informal ER promotes China’s GVC position; this influence exhibits regional heterogeneity. Second, the impact of ER on China’s GVC position exhibits spatial spillover effects, concentrated in informal ER. Third, ECA exhibits both threshold effects and moderating effects in ER’s impact on the GVC position. For formal ER, when ECA is low, formal ER suppresses the GVC position; as ECA increases and surpasses a certain threshold, however, formal ER enhances the GVC position. For informal ER, ECA positively moderates the impact of informal ER on GVC position.

Manufacturing in China has developed rapidly with the widening and deepening of globalization, but only innovation can industry keep upgrading and enhancing its international competitiveness. This paper combines Global Value Chains (GVCs) and National Value Chains (NVCs) in a unified theory framework, uses Structural Decomposition Analysis (SDA) to explore how innovation capacity, production capacity, and vertical specialization affect innovation performance from the supply and demand sides by examining the case of Electronic Manufacturing of China. We observe that innovation inputs and outputs present strong regional heterogeneity between coastal and inland regions. Although most regions continue to engage in processing trade or assembly manufacturing in GVCs, NVCs are gradually established and led by coastal regions. The results indicate a good chance for cultivating innovation capacity in coastal regions. After assessing the influence of determinants on innovation performance, we observe that from supply-side, innovation capacity has a positive effect on innovation performance, production capacity in coastal regions is improving, and domestic demand for domestic products is increasingly important. From the demand side, innovation capacity continues to have a positive effect on innovation performance, production capacity improves rapidly, and imported intermediate inputs enhance innovation performance more effectively than domestic intermediate inputs.

This paper uses combined data from Chinese Customs Trade Data, Chinese Industrial Enterprise Data, and the World Input-Output Tables to empirically study the relationship between foreign direct investment (FDI), financing constraints, and firms’ global value chain (GVC) position. The results show that FDI significantly promotes firms’ ascension in the GVC, while financing constraints not only inhibit firms’ ascension in the GVC but also weaken the promoting effect of FDI. However, these conclusions exhibit significant heterogeneity due to differences in firm ownership, trade methods, main export destinations, firm productivity, and regional location. Additionally, compared to FDI from Hong Kong, Macao, and Taiwan regions of China, FDI from OECD countries has a stronger effect on firms’ ascension in the GVC. Moreover, financing constraints weaken the promoting effect of FDI from Hong Kong, Macao, and Taiwan, but enhance the effect of FDI from OECD countries.

Global value chains and domestic innovation

Focusing on technology spillover’s bridge effect between bidirectional Foreign Direct Investment (FDI) and Global Value Chain (GVC) position of manufacturing industry, this paper first analyzes theoretical mechanism of bidirectional FDI’s influence on GVC position, by taking into account technology spillover perspective, and then it verifies the theoretical framework by using 15 Chinese manufacturing sub-industries data in the latest ten years. The Generalized Least Squares regression results prove that technology spillover plays as a core channel of both Inward FDI’s and Outward FDI’s GVC position promotion effect, and the interactive development of bidirectional FDI can further significantly enhance this bridge effect.

The effects of participation in global value chains on energy intensity: Evidence from international industry-level decomposition

In the context of China’s integration into global value chains (GVCs) and construction of lower-carbon economy, this study examines the effects of two different types of GVC involvement (i.e. GVC participation and GVC position) and domestic research and development (R&D) on carbon emissions, simultaneously and interactively. Using the panel data of 17 industrial sectors in China from 2005 to 2015, which were identified by merging the Organisation for Economic Cooperation and Development (OECD) industries and China’s National Economy Industries, we estimate GVC participation and GVC position. We then test the interaction effects of GVC involvement and R&D on carbon emissions, applying the extended Stochastic Impacts by Regression on Population, Affluence, and Technology (STIRPAT) model and feasible generalised least squares (FGLS) method. The results reveal that both GVC involvement and R&D have negative effects on carbon emissions. Moreover, the complementary effect occurs between GVC participation and R&D, while the substitution effect occurs between GVC position and R&D.

Given the vital importance of global value chains (GVCs) position for a country's international competitiveness, this paper tries to investigate the impacts of environmental regulation on the GVCs position of China's industrial sector. Using the latest value-added decomposition method, we first measure the GVCs position of China's industrial sector from 2003 to 2014. Subsequently, both two-stage least squares (2SLS) method with panel data and mediating effect model are employed to empirically examine the effects of environmental regulation on China's position in GVCs. The results indicate that environmental regulation has significantly upgraded the GVCs position of China's industrial sector, and the effect is more evident for the sub-sectors with originally lower GVCs position. The mediation effect test shows that increasing R&D investment is an important channel through which environmental regulation affects the GVCs position of China's industrial sector, which verifies the existence of the Porter hypothesis. Further analysis finds that the enhancement of GVCs position of China's industrial sector caused by environmental regulation is mainly achieved through reducing the backward GVCs position.

Does global value chain participation and position lead to innovation in an emerging economy? Industry-level evidence from Indian manufacturing industries

Digitalization, positioning in global value chain and carbon emissions embodied in exports: Evidence from global manufacturing production-based emissions

Present-day supply-side structural reform in China places an abundance of emphasis on environmental protection. In this paper, we re-measure the upstreamness of Chinese enterprises in global value chains as described by Ni Hongfu (2022). Subsequently, the impact of environmental regulations on the global value chain position of Chinese firms is studied in depth, using the cleaner production standards promulgated and implemented by the Chinese government in 2003 as a quasi-natural experiment, taking a time-varying difference-in-differences (DID) approach. The data sources employed include the Cleaner Production Standard Implementation Industry Directory, the World Input–Output Database (WIOD), the China Industrial Enterprise Database, and the China Customs Import and Export Database. This research discovered the following: First, adopting cleaner production standards significantly improves Chinese enterprises’ positions in the global value chain—a conclusion that holds up to a number of robustness tests. Second, in terms of firm size, capital intensity, ownership characteristics, and government subsidies, there exists a noticeable heterogeneity in the promotion of the adoption of cleaner production standards for the improvement of Chinese enterprises’ global value chain position. Third, the implementation of cleaner production standards stimulates the upgrading of Chinese enterprises’ global value chain position, primarily through the entry and exit impacts, product-switching effect, and innovation compensation effect. The following proposals for policy can be implemented in light of the findings of this paper: “upstream prevention” strategies in the development of future environmental protection and trade policies should be advocated; nuanced and stratified environmental policies should be meticulously constructed; a mix of policies should be employed to bolster the institutional support for green environmental regulations; the integration of environmental governance into the evaluation framework should be emphasized; the creation of an innovation-oriented environmental governance system should be expedited. In conclusion, the findings of this research provide empirical evidence on the role of environmental regulations in coordinating ecological development and strengthening the position of Chinese enterprises in global value chains, which may assist other developing nations in making the transition to a path of high-quality growth.

This article utilizes a novel approach by combining the export domestic value-added rate and export technology complexity to gain insights into a country’s comprehensive global value chain (GVC) position. Additionally, we incorporate psychological theories, specifically fluid intelligence and crystallized intelligence, to elucidate the impact of population aging on a country’s GVC position. The empirical results reveal that population aging has a positive and statistically significant effect on the comprehensive indicators of a country’s GVC position and export technology complexity. However, it exerts a negative and statistically significant influence on the export domestic value-added rates. These findings hold robustly across various tests conducted. Notably, we find that the influence of population aging on different GVC position indicators varies depending on the income level, degree of aging, and rate of aging acceleration.

Firm's position in global value chains and its impact on pollutant emissions: Evidence from Chinese manufacturing firms