How does global value chain embeddedness affect environmental pollution? Evidence from Chinese enterprises

Abstract

This study investigates the impact of global value chain (GVC) embeddedness on corporate polluting behavior at the micro level. Although existing studies have examined the environmental effects of GVCs, little attention has been paid to the underlying mechanisms through which GVCs affect corporate pollution. To fill this knowledge gap, this study uses Chinese industrial enterprise data over the period 2000–2013 as the research setting to examine the impact of embedded GVCs on corporate polluting behavior. We find that the embeddedness of enterprises in a GVC reduces SO2 emissions. The reduction effect of GVC embeddedness is transmitted through scale and technology effects but not through the composition effect. Heterogeneity analysis indicates that such a reduction effect on corporate pollution is more pronounced in general trading enterprises, domestic enterprises, and enterprises located in regions with high environmental regulations. Further analysis suggests that GVC embeddedness reduces SO2 emissions, mainly through front-end pollution control, by reducing the use of fossil fuels rather than back-end governance. Our findings have important practical implications for GVC participation and sustainable development in emerging economies.