Forward Linkages Research Articles

Building Upon “Foundationalism” to Achieve the Objectives of Contemporary Science: How this can Lead to Faster Scientific Progress and Inclusive Science

This paper is one of our most important ones in the core philosophy of science, and one that we expect to stand science in extremely good stead as well. We believe this can move the needle and push the envelope as well, and lead us to what we have always called “scientific progress at the speed of light”. We naturally commence this paper by tracing the history of the term “foundationalism” itself, right from the time of the Ancient Greeks, renaissance and enlightenment thinkers, and finally to the modern and contemporary ones. Types of foundationalism such as strong and weak foundationalism, modest foundationalism, and then finally anti-foundationalism, internalism and externalism are also discussed and dissected threadbare along with allied and related concepts such as circular logic and reasoning, regress and infinite regress, all of which form a part of epistemology. The core concepts forming a part of this paper such as forward linkages, backward linkages, and traceability matrices are also discussed. We follow this up with the core principles of this paper, and discuss the ideal and recommended direction of research, including the ideal nature of research, primary research, secondary research, basic and applied research, and cross-cultural collaboration including vertical and horizontal collaboration as well. This paper is also much more importantly linked to our papers on sociocultural change, pedagogy, scientific methods, and other papers in the social sciences for maximum impact and efficacy. It is therefore an important part and parcel of our globalization of science movement, and one that will help realize our overall goals and mission greatly.

The productivity spillover effect of foreign divestment: Evidence from Chinese industrial enterprises

Foreign divestment in China is garnering increasing social attention. This study investigates the productivity spillover effects of foreign divestment based on Chinese industrial enterprise data from 2000 to 2007. Our findings indicate that foreign divestment negatively impacts the total factor productivity (TFP) of incumbent enterprises, especially through backward linkages. We examine potential mechanisms based on the characteristics of divested and incumbent enterprises. The closure of foreign-invested enterprise disrupts industrial connections, whereas the sale of foreign equity to domestic shareholders strengthens local industrial linkages, thus presenting an opposite effect. Hong Kong, Macau, and Taiwan (HMT)-invested enterprises tend to local sourcing, leading to divestment effects through backward linkages. Conversely, non-HMT enterprises, with a higher capability to provide differentiated intermediate goods, primarily exhibit forward linkage effects. Further analysis reveals that incumbent enterprises with lower technological capabilities are more dependent on their foreign suppliers and customers. Domestic non-state-owned enterprises and those in regions with lower economic development or marketization levels also have less stable input-output relationships. As a result, these enterprises are more susceptible to the vertical spillover effects of foreign divestment.

Horizontal and vertical foreign direct investment linkages, absorptive capacity and domestic investment: evidence from Indonesian plant-level data

PurposeThis study examines the effect of horizontal and vertical foreign direct investment (FDI) linkages on the investment decisions of domestic plants. It explores this link for plants in a developing country, where the dynamics of FDI spillovers on domestic investment choices are distinct from those in developed countries. It also adds to the literature by examining the role the absorptive capacity of plants plays in this nexus, enriching our understanding of the interaction between FDI and the investment choices of domestic plants and providing insights for policymakers and managers seeking to maximize the positive effects of FDI spillovers.Design/methodology/approachThis study specifies the dynamic investment equation using the Euler and Q models. This equation is estimated using the first-difference and system generalized method of moments GMM estimators, which allow us to address persistency, endogeneity and unobserved plant-specific effects. FDI exposure proxy, calculated by weighing the FDI engagement variable by firm size, captures the strength of foreign equity participation in an industry and time. Input–output (IO) tables are used to calculate the proxies for horizontal and vertical (backward and forward) FDI. Total factor productivity is calculated using a method advocated by Olley and Pakes (1996) that allows us to control for selection and simultaneity.FindingsWe find that FDI inflows into both the domestic plants’ own industry and the input-supplying industry significantly boost the capital accumulation of the average domestic plants. Differentiating plants based on their absorptive capacities reveals that the presence of foreign firms significantly increases capital deepening for domestic plants with high absorptive capacity within their own industry (horizontal linkage) and in industries that supply inputs to the FDI-exposed industry (backward linkage). However, it leads to a decrease in capital deepening for high absorptive capacity domestic plants in industries using inputs produced by the industry exposed to FDI (forward linkage).Research limitations/implicationsThese findings have implications for policymakers and managers who aim to design incentives to maximize the positive spillover effect of horizontal and vertical FDI linkages on the capital deepening of domestic plants. Exploring additional mechanisms that could play a role in this nexus, separately for plants in different industries (such as the industries in which the country has a comparative advantage), may be fruitful.Originality/valueTo our knowledge, the relationship between the investment behavior of the domestic plants and FDI linkages has not been examined for a developing country. It is useful to explore this link in developing countries, as the investment choices of plants in these nations may be impacted differently by FDI spillovers than those in advanced nations. This study further contributes to the literature by investigating whether the plants’ absorptive capacity affects the nexus between FDI linkages and investment decisions of the domestic plants. The findings are valuable for policymakers and managers who aim to increase plants’ capital accumulation in developing countries.

Shift in the Importance of Consumption of Professional Services and Investments (GFCF) for Manufacturing Industries by R&D Intensity in Advanced Economies

The research revealed and analysed a trend, between 1995-2020, of a declining gross fixed capital formation (GFCF) to domestic value added in gross exports (DVA in Gross exports) ratio in manufacturing industries for most Advanced Economies, which occurred on the backdrop of increasing of intermediate consumption of professional services. Our model proves the partial substitution of GFCF with intermediate consumption of professional services in Advanced Economies due to the change of production operating model (value chain management in manufacturing industries), which is evidenced by high influence of the combined factor on the DVA in Gross exports. This substitution facilitates the upgrading of value chain by creation of backward and forward linkages for manufacturing industries, depending on their R&D intensity. Systemic and long-term nature of changes may reflect potential paradigm shift in Advanced Economies' production operating models.

The role of institutions in logistics performance as a new road toward GVC participation

Participation in global value chains (GVC) is increasingly seen in recent years as the new development challenge by policymakers in many countries. The COVID-19 pandemic recently revealed to the public eye that logistics capabilities are the backbone of the country's competitiveness within the GVC. Nevertheless, studies on logistics performance and GVC are still lacking until today. This paper aims to investigate the role of national institutional quality in the logistics performance-GVC participation nexus, using 68 countries covering 2005 through 2021. The findings of the present study reveal that (a) logistics performance has a positive and significant impact on GVC participation, (b) improving the overall level of governance has a positive impact on GVC participation, (c) the quality of national institutions plays a significant moderating role in logistics performance and GVC participation nexus, (d) the impact of logistics performance on forward linkage, under high governance countries is greater than under low governance countries and (e) the backward linkage is much more sensitive to the time and cost control related to cross boarder and document compliance in countries with poor governance than in countries with good governance.

The economic contribution of U.S. seafood imports throughout the value chain: A sectorial and species-specific analysis

Imports can contribute to economic activity and have positive backward and forward linkages in national and regional economies, particularly in the presence of limited domestic supply. Seafood in the United States (U.S.) is a remarkable example of import dependence since most consumption by both processing industries and households relies on imports. To assess the economic contributions of seafood imports, this study starts by applying a Ghoshian matrix to estimate the forward linked economic activity associated with seafood imports. It concludes that the $22.4 billion of seafood imported by the U.S. in 2019 supported a significant amount of economic activity across different industries. The economic contributions associated with this activity are estimated at more than $70 billion in sales revenues, $37 billion in value-added, and 512 thousand full-time and part-time jobs throughout the U.S. economy. In terms of industries, the largest shares of the total economic contributions are attributed to retail and restaurant activity, while, in terms of species, shrimp and salmon support the most significant shares of economic activity attributed to seafood imports. The results suggest that policies that target the limitation of seafood imports or international trade will have adverse effects even in sectors that, in many cases, are not directly involved with the commodity supply chain but depend on the economic activity generated through the supply chain.

Global value chains and inward FDI: An empirical investigation of European firms

AbstractThis paper empirically investigates whether and how the level of GVC integration of a given market may explain the presence of foreign‐owned firms. Using firm‐level data from 28 European Union countries during the period 2008–2014, we provide evidence that a greater country‐sector‐level GVC participation, via both backward and forward linkages, exerts a positive effect on a firm's likelihood to receive FDI. These findings appear particularly strong for new EU Member States and services industries when looking at the differences across countries and sectors. Interestingly, when exploring the role of country‐sector position along the GVC, we find that FDI gains from backward GVC integration are more prominent if the markets are associated with the final stages of the supply chain, whereas those from forward GVC integration are greater when the markets are associated with the initial stages, in line with the smile curve hypothesis.

Global food value chains and obesity in low- and middle-income countries

Low- and middle-income countries (LMICs) are experiencing disproportional increases in overweight or obesity rates. Parallel to this trend, many LMICs are witnessing significant growth in their participation in global food value chains (GFVCs). This paper aims to shed light on the public health implications of increasing participation in GFVCs. Leveraging macro- and micro-level data spanning 25 years, we study the relationship between countries’ participation in GFVCs and women’s overweight or obesity rates. We explore heterogeneous implications by disaggregating countries’ participation into backward and forward linkages in GFVCs, as well as across rural and urban areas. We find that temporal increases in countries’ participation in GFVCs are significantly associated with increasing overweight or obesity rates, primarily when countries participate in backward linkages and for urban populations. Participation in GFVCs involving forward linkages appears to have negligible implications, and the relationship between participation in GFVCs and obesity disappears for rural women. Furthermore, we find that an increase in countries’ participation in GFVCs is associated with an increase in consumption of energy-dense foods such as sugar, commonly linked with obesity. Our findings have important implications for informing public policies aimed at addressing the increasing obesity rates and associated economic and health burdens in LMICs.

Linking hypothetical extraction, the accumulation of production factors, and the addition of value

AbstractIn industrial ecology, approaches have been developed to analyze the contribution of specific sectors to environmental impacts within supply chains. In economics, a range of methods addresses the forward linkage (use of output) and backward linkage (dependency on inputs) of sectors, and the analysis of key sectors. This article offers a formal investigation of the relationship between these. It shows that both the analysis of supply chain impacts and of intersectoral linkages can be seen as special cases of a more general hypothetical extraction method (HEM). In HEM, sectors' role is assessed as the effect of their removal on the input–output model's solution. HEM also allows for the (partial) extraction of individual transactions. HEM thus offers a flexible approach to assessing the contribution of one or several sectors, or transactions, or parts thereof, to value added or footprint of any final demand. It can be applied to study the environmental footprints of companies or intermediate products, the contribution of certain inputs to sectors, or the potential impact of disruptions of supply chains on producers and consumers. In this article, the price model for HEM is introduced to identify the contribution of the extracted (target) sectors to the price or unit footprint of a commodity.

"Beyond the Industrial Enclave: Analysing the Spatial and Socio-Economic Impact of Pithampur Automobile Cluster, India "

Industries are considered engines of growth for an economy. Developing countries like India have attempted to boost economic growth by initiating industrialization in areas unsuitable for industrial growth. Most studies on industries/industrial clusters focus on their financial performance, backward and forward linkages, and managing the supply and demand chains, rather than the socioeconomic and spatial influence on their locations and surrounding regions. Such studies are critical in determining which industry contributes to regional growth and what their spatial influences are. This paper contributes to this domain of research. In this study, the Pithampur Automobile Cluster (PAC) is examined. It was developed by the Government in 1984 with the intent to develop a backward area in the state of Madhya Pradesh in India. The study aims to discern PAC’s influence on its surroundings, encompassing Pithampur town, adjacent villages, and towns within a 12–15-kilometer radius. Data from multiple census years (1981, 1991, 2001, 2011) and Land Use Land Cover (LULC) Analysis through GIS for the years 1981, 1991, 2001, 2011, and 2021 are employed. Contrary to expectations, the study reveals that the impact of industrial development is primarily confined to the boundaries of Pithampur, with surrounding villages showing relative detachment. The emergence of growth corridors is attributed to the appeal of neighbouring towns that offer better amenities and a more economically viable living environment.

Measuring the forest-based bioeconomy in Estonia, Latvia, Lithuania, and Finland

ABSTRACT This paper aims to present an input-output model of the forest-based bioeconomy, enabling insight into its contribution to total gross value added (GDP), employment, and CO2 emissions in Estonia, Latvia, Lithuania, and Finland. To quantify this contribution, the paper utilizes input-output tables of the four countries. The forest-based bioeconomy includes forestry, the processing of forestry products (forward linkages), and the direct and indirect use of inputs (backward linkages) from forestry and processing industries. Our analysis reveals that while forestry itself is a small industry, contributing minimally to GDP (ranging from 0.40% in Lithuania to 1.90% in Finland), and the forest-based bioeconomy is considerably larger. For instance, its contribution to GDP ranges from 3.59% in Lithuania to 7.22% in Estonia. Moreover, the forestry-based bioeconomy exhibits negative net CO2 emissions, primarily due to CO2 sequestration by forest lands and harvested wood products. Despite the substantial negative CO2 emissions associated with forestry activities, without sequestration, the forestry-based bioeconomy's share in total emissions ranges from 5.14% in Lithuania to 14.88% in Finland.

Examining the Relationship between Economic Diversification and Sectoral Linkages: Insights from the Iraqi Economy

Economic diversification is considered one of the important factors in driving economic growth, sectoral growth, and creating economic linkages between the sectors of the national economy. In Iraq, the relative importance of the oil sector in the gross domestic product is higher compared to other sectors such as agriculture and industry, where economic diversification and sectoral linkages are absent, as Iraq is considered a rent-based, one-sided country that lacks diversification of the export and production structure. This research assesses the status of economic diversification in Iraq and the role of intersectoral linkages in facilitating or hindering this process. Overall, the research followed a structured, inductive approach, utilizing secondary data sources and a combination of descriptive and analytical techniques to address the research objectives. Results showed that the relative contribution of the agricultural sector to GDP in 2010 was 5%, and for the industrial sector it was 2.3%, while the direct forward linkages of the agricultural sector were 4%, for the industrial sector 14%, and the indirect linkages were 1.59% for the industrial sector and 1.74% for the transport and communications sector. The research proposes establishing a broad-based manufacturing industry in Iraq that is driven by intersectoral linkages and dependence on domestic economic resources.

Indirect channel of trade agreements in deepening global value chains

AbstractPreferential trade agreements (PTAs) between trading partners are known to have positive impact on the expanding and deepening of global value chain integration due to lower trade and investment barriers. Less is known, however, is if other PTAs of PTA partners have any impact on the value‐added trade linkages of the direct PTA partners concerned. Based on compositive indicators measuring the breadth and depth of PTAs from 2007 to 2018 and using Multiregional Input–Output Table database covering 62 countries and 35 sectors and the Content of Deep Trade Agreements database, this paper estimates the multiplicative form of the constant‐elasticity augmented gravity equation model by a Poisson Pseudo Maximum Likelihood (PPML) estimator. This study shows that indirect impact of the deepening of trade agreements of a country's PTA partner exerts positive, significant impact on value‐added exports of a country. Both backward and forward linkages of a country measured by various decomposition of valued added exports indicate this indirect channel of value chain deepening effect even outweighs the direct impact from the deepening of PTAs between direct trading partners with significant policy implications in formulating PTA strategies.

Unemployment ripple: The impact of mine closures in Canada, 1987 to 2020

Between 1980 and 2000, total employment in the Canadian mining sector halved. While the literature on resource economy is thriving in Canada, little is known about how local labor markets experienced such a decline. This article presents a novel strategy to measure the effects of mine closures on local direct, indirect, and induced employment. This ripple effect is estimated using impulse response functions over a 10-year horizon after the closure. I focus on the period between 1987 and 2020 and identify mine closures by introducing a novel longitudinal database constructed from archival maps. Results show that a persistent negative effect on mining employment is associated with a delayed and substantial negative impact on employment in industries with backward and forward linkages with the mining industry. The article contributes with a finer understanding of the transmission mechanism across the local labor markets and clarifies the need for cross-industry policies after a closure.

US Trade Policy Uncertainty and Nigeria’s Participation in Global Value Chains: Evidence from Frequency Domain Causality, Wavelet Coherence Analysis, and Time-Varying Causality

AbstractThis study examines for the first time whether trade policy uncertainty emanating from the United States significantly predicts Nigeria’s participation in global value chains. It further examines the kind of global value chain participation in Nigeria (forward or backward linkages) that is most predictable by the United States trade policy uncertainty. To achieve the study objective, frequency domain causality, wavelet coherence analysis, and time-varying causality are employed in analyzing annual data sets over the period 1990–2019. The summary of the study findings is as follows; first, trade policy uncertainty emanating from the United States significantly predicts Nigeria’s overall integration into global value chains. Second, there is a positive association between Nigeria’s integration into global value chains and the United States trade policy uncertainty. Third, Nigeria’s overall integration into global value chains is highly correlated with the United States trade policy uncertainty in periods around the global economic crisis of 2007/08 and Nigeria’s recession of the late 2010s. Fourth, most of the predictability noticed in the relations between trade policy uncertainty generated by the United States and the overall global value chain participation is caused by the relations between the United States trade policy uncertainty and Nigeria’s forward linkage into global value chain participation.

Can SEE economies grow stronger together? Empirical evidence from the CEFTA region

ABSTRACT This article investigates the trade and growth benefits of the CEFTA agreement for its members using panel econometric techniques and analysis of backward and forward linkages with the CEFTA and the European economies. Although the countries have not reached their end goal of membership of the European Union, the research shows that CEFTA has supported their economic growth. However, there is trade heterogeneity in terms of the extent to which individual countries use CEFTA value added in their manufacturing exports. Less-developed economies seem to rely more on regional (CEFTA) supply chains, while manufacturing-based economies are increasingly coming to rely on EU supply chains. The countries have not built a strong export advantage abroad, as very little of their value added is used in EU exports.

Factors influencing the participation of Vietnamese enterprises in global value chains: Insights from the manufacturing and processing sectors

This research aims to investigate the factors that impact the participation of companies in Vietnam's Manufacturing and Processing sector in the Global Value Chain (GVC). We employ panel data analysis with a dataset of 387,994 observations from 107,125 enterprises in this industry spanning 2011-2020. Both Ordinary Least Squares (OLS) and Generalized Moment Method (GMM) are used to assess the factors affecting the industry's GVC engagement. The Arellano-Bond test checks for autoregressive processes of order one (AR(1)) or order two (AR(2)) in the model to see if the idiosyncratic error term exhibits serial correlation. The Sargan test checks for over-identifying restrictions in the statistical model. The results reveal that the ratio of large enterprises" exerts the most significant positive influence on the participation of Vietnamese enterprises in the GVCs, closely followed by "Institutional and policy environment." Conversely, HHI, TFP, and GDP growth rates show significant negative impacts. For Foreign Direct Investment (FDI), horizontal spillovers are positive and statistically significant. However, significant results also show a negative coefficient in the Backward GVC and a positive one in the Forward GVC. From these findings, we point out some important policy implications: (1) the government should strengthen favorable conditions for the participation of large enterprises and leading SMEs; (2) It is necessary to improve the institutional and policy environment and refine policies to attract FDI, especially with a focus on promoting forward linkages to facilitate greater engagement of the enterprises in the GVCs.

Exploring the backward and forward linkages of production network in a developing country

This paper applies social network analysis (SNA) techniques to the input–output table in order to investigate the production network of Pakistan’s economy. Through different network measures, it identifies the sectors that exert significant direct and indirect impacts on other sectors. The findings reveal that, overall, sectors have weak forward linkages relative to backward linkages. The services sectors, particularly transportation and trade services, have the highest out-degree (a measure of forward linkages). In contrast, the manufacturing sectors demonstrate comparatively lower connectivity than the services sectors. The sectors of electricity, petroleum, and chemicals emerge as the most widely utilized inputs across various industries. Despite their relatively moderate immediate absorption in downstream industries, these sectors possess the potential to affect other industries indirectly. Considering the combined measures of network analysis, these sectors also emerge as the most crucial sectors in Pakistan’s production network. This suggests that enhancing efficiency in the energy, refining, and petrochemical industries will yield the highest economy-wide impact.

Analisis Pembangunan Moda Raya Terpadu Terhadap Struktur Perekonomian Provinsi DKI Jakarta Tahun 2013-2019

The Provincial Government of DKI Jakarta Investment on Moda Raya Terpadu (MRT) project is an effort to improve the mass transportation system and overcome congestion problems. The development of Moda Raya Terpadu project will affect the construction sector and other sectors. This study aims to analyze the role of the construction sector, inter-sectoral linkages, degree of sensitivity and spread, multiplier effect, and also analyze the economic impact of government investment on The Moda Raya Terpadu project, in terms of output, income, and job opportunities.This research has been conducted with an input-output analysis. This analysis uses data from the DKI Jakarta Province Input-Output Tables based on producer prices year 2012, classified as 72 sectors that have been aggregated into 17 main sectors. This study indicates that the construction sector has a massive contribution to the formation of output in DKI Jakarta Province. The construction sector has a greater backward linkages value than the forward linkages value. The construction sector has a higher degree of spread therefore this sector can encourage the growth of its upstream sector. The construction sector has owned the largest output multiplier value compare to income multiplier and job opportunities. The Moda Raya Terpadu (MRT) project can create an overall economic output of 42,8 trillion rupiahs, an enlarge in household income of 5,2 trillion rupiahs, and expand for 51 thousand job opportunities

The vulnerability of shifting towards a greener world: The impact of the EU's green transition on material demand

The green transition from fossil fuels to renewables requires acquisition of rare earth minerals and other materials for construction of renewable energy technologies and may lead to new dependencies through imports potentially causing immense pressure on global supply chains. This study investigates the material vulnerability of sectors and countries in the EU. Vulnerability maps are created for the EU's material demands by combining three analyses: input-output analysis, forward linkage analysis and network analysis. The approach reveals the relative importance of individual sectors and their vulnerability given increasing demand. As such, the analyses help to identify which sectors, based on their current implementation of renewable energy sources, could put a country and the EU at risk of not meeting their mitigation targets by 2050. The analysis concludes that Austria, Germany, the Czech Republic, Denmark and Slovakia will experience particularly large material vulnerabilities in several of the materials investigated. Hence, such findings can provide early warnings to sectors and countries about potential implications in their supply chains along with potential mitigation measures such as secondary sourcing, material substitution and material diplomacy.