Global Value Chain Activities Research Articles

Global value chains and within-country inequality: The role of functional positioning

This work addresses the nexus between Global Value Chains (GVCs) and within-country inequality by distinguishing two key dimensions: the “product-level positioning” of economies, i.e. their involvement in more upstream or downstream industries, and their “functional positioning”, defined by the value-adding activities performed along GVCs. Using trade and FDI data on 101 countries in 2003–2015, we show that a more upstream product-level positioning is associated with higher inequality in low- and middle-income countries. This is consistent with these countries’ greater involvement in industries supplying raw materials and energy inputs, characterised by a remarkable income polarisation. Conversely, a more downstream product-level positioning goes together with greater inequality in high-income countries, reflecting downward pressures on labour income due to massive outsourcing of inputs to foreign suppliers. As for functional positioning, we find that a greater involvement of economies in pre- and post-production stages is associated with lower income disparities, while a larger engagement in production operations goes together with higher inequality. This result is driven by low- and middle-income countries, suggesting that a greater involvement in knowledge-intensive GVC activities fosters technological upgrading in these economies, with beneficial effects also on the lower segments of the labour force.

Unravelling the entrepreneurial ecosystem conditions spurring the global value chains: a configurational approach

PurposeDespite the popularity of the entrepreneurial ecosystem (EE) concept, research on its value-adding activities receives less attention. Thus, in this article, the authors investigate the role of EEs in supporting global value chain (GVC) activities.Design/methodology/approachThe authors employ the fuzzy-set qualitative comparative analysis (fsQCA) technique to identify practical configurations of EE’s framework and systemic conditions spurring GVC activities in 80 countries.FindingsThe findings suggest different configurations of EE`s framework and systemic conditions necessary for various GVC activities regarding input-output structure, geographical scope, upgrading, and forward and backward participation.Originality/valueThis study contributes to the extant literature by pioneering the EE approach to explaining GVC development. Moreover, the findings provide novel insights for understanding the EE – GVC interplay. As a result, the study offers a more nuanced understanding of how the EE supports GVC activities.

Trade-off between carbon emissions and employment embodied in global value chains: A study based on enterprise heterogeneity in China

Comprehensively measuring embodied carbon emissions and employment generation from global value chain (GVC) production activities is essential for GVC upgrades and sustainable development. Previous studies have ignored embodied carbon emissions and employment generation from GVC production activities involving cross-border direct investment, which may underestimate the impact of GVC participation. Using an intercountry input-output model distinguishing domestic and foreign-invested enterprises, this study measured embodied carbon emissions and employment generation in China's GVC production activities from 2005 to 2018 and explored their trade-offs based on the aggregate-embodied carbon employment intensity (ACEI). The major findings were as follows. (1) Trade-related GVC contributes more to embodied carbon emissions than to that of embodied employment. However, investment-related GVC had the opposite effect. Mixed trade and investment-related GVC contribute approximately equally to carbon emissions and employment. (2) China experienced increasing environmental losses relative to employment generation from GVC participation increased between 2005 and 2018. The environmental costs of creating employment units through investment-related GVC activities were lower than those for the other two GVC routes. (3) High R&D-intensive manufacturing industries suffered a notable decline in ACEI. This finding suggests that a double dividend for the environment and employment is more likely to be achieved in high-tech manufacturing industries. (4) The ACEI of foreign-invested enterprises in China was lower than that of domestic enterprises, particularly in the production-sharing activities between foreign-invested enterprises, which exhibited a better trade-off between socioeconomic benefits and environmental damages. These findings provide useful insights into the impact assessment of GVCs, which aid in achieving sustainable development in China and other emerging economies.

Tracing carbon emissions and intensity in relational global value chain activities

Existing studies on emission accounting in global value chains (GVCs) have not focused on the relational nature of GVC activities manifested as the interaction of intermediate goods between enterprises. This paper proposes a relational GVC emissions accounting framework based on an inter-country input-output (ICIO) model distinguishing between domestic-owned enterprises (DOEs) and foreign-invested enterprises (FIEs), which is classified as trade-based, investment-based and hybrid-based emissions. Using AMNE-ICIO tables from 2005 to 2016, this paper traces emissions and carbon intensity in relational GVC activities at the global, economic, and industry levels. We find the following: (1) Investment-based emissions accounted for about 94.15% of the increase in relational GVC emissions, of which more than half comes from the interactive activities between DOEs and FIEs. (2) For the United States, high-income economies, and high-tech manufacturing, investment-based emissions were higher than trade-based emissions, and the reverse was true for upper-middle and lower-middle income economies and China. (3) Although relational GVC carbon intensity was high, the trend of decline was significant. (4) Compared to trade activities, investment-based activities were less carbon intensity in China and upper-middle income economies due to the interaction of production between FIEs and DOEs. The findings add new insights into the coordination of global emissions reductions and the allocation of emissions responsibility.

Measuring employment in global value chains based on an inter-country input-output model with multinational enterprises

With rapid globalization, employment in global value chains (GVCs) has attracted increasing attention. Multinational enterprises (MNEs) are the major participants in GVC activities, whose employment creation through cross-border direct investment in GVCs has not been systematically characterized, leading to an underestimation of GVCs and their employment impacts. To fill this gap, this study measures the employment embodied in GVCs based on an inter-country input-output model with MNEs. The major findings are as follows: (1) the contribution of MNEs to GVC employment is significant (accounting for 7.4–8.0 %), especially in high-income economies (13.8 %) and high-tech manufacturing industries (22.6 %); (2) the major route by which foreign direct investment (FDI) drives employment is through D-F type production-sharing activities that satisfy local demand; and (3) the sectoral structure of FDI-related GVC employment not only varies between economies but also among the three types of production-sharing activities (D-F type, F-D type, and F-F type). These findings provide valuable insights for understanding how MNEs affect employment in GVCs and can help accurately assess the potential impacts of GVCs on the labor market.

Bribery, global value chain decisions, and institutional constraints: Evidence from a cross-country firm-level data

We employ a multi-country firm-level data covering 109 developing countries during the 2005–2017 period to investigate the effect of bribery on the global value chain (GVC) decision for firms and the moderating roles of firm size and institutional constraints in such relationships. In this research, we treat the GVC participation as a strategic choice and GVC firms are defined as two-way traders who export and import simultaneously and hold a quality certification. We also distinguish GVC decisions into GVC participation decisions that firms decide to carry out GVC activities and GVC switching decisions that firms decide to switch from non-GVC to GVC status. Institutional constraints are firms' self-ration on corruption, political stability, court, and customs and trade regulations. Our empirical findings support the “greasing-the-wheels-of-GVC” hypothesis that greasing bribery positively influences the GVC participation and switching probability. Paying greasing bribes only improves the small and medium-sized firms’ probability of becoming GVC actors if there is no institutional constraint. With sufficiently strong bargaining power, large-sized firms grasp more benefits from bribe payments even in the weak and poor institutional system, thus becoming a part of global supply chains. Finally, when we control the endogeneity, the impacts of greasing become more sizable and we find evidence for the “sanding-the-wheels-of-GVC” hypothesis of rent-seeking bribery.

Two sides of the same coin: The economic and environmental effects of China's international trade from a global value chain perspective

China's accession to the World Trade Organization (WTO) has led to rapid economic growth and international trade development. However, China is also challenged with a heavy environmental burden due to the massive carbon emissions transferred through trade. By splitting production activities into traditional trade and global value chain (GVC) activities, this paper uses an intercountry input-output (ICIO) framework to study the imbalances of the economic and environmental effects between China's imports and exports at different levels. We define the indices value added per embodied emission in imports and exports (VPM and VPX, respectively). Additionally, we find a large gap between China's VPM and VPX, primarily because developed economies gain much higher value added per embodied emission than China gained through exports in GVC activities. Then, we study how to narrow the gap between China's VPM and VPX. The application of multiplicative structural decomposition analysis (SDA) and the logarithmic mean Divisia index I (LMDI-I) approach reveals the total and bilateral-sectoral contributions of the driving factor effects to the changes in China's VPM and VPX. The results provide tailored implications for promoting the comprehensive economic and environmental benefits of China's imports and exports.

BLOCKCHAIN DRIVEN INTERNATIONAL BUSINESS: A NEW FRONTIER

ABSTRACT This paper discusses the impact blockchain technology has on international business. There are great opportunities for incorporating the blockchain within global value chain activities and cross-border trade facilitation, along with business functions across borders – i.e., blockchain driven international business (BDIB). The paper posits that while initial investments in BDIB would be higher, there would be better performance realized over the long term. It is critical, then, to better understand and research the incorporation of this technology across the various needs of multinational enterprises (MNEs) as well as international small & medium sized enterprises (SMEs). Implications are discussed. Keywords Blockchain, Global Value Chains, International Business

국제기업가지향성이 GVC지속가능 성과에 미치는 영향 연구

With the recent emphasis placed on the Global Value Chain(GVC) in the field of international business, there has been growing attention for sustainable management encompassing not only the economic performance of firms participating in GVC activities but also their environmental and social performance. Presenting international entrepreneurial orientation as a leading factor in sustainable GVC performance, this study aims to investigate the effects of the sub-factors of international entrepreneurial orientation, including innovativeness, proactiveness, and risk-taking on sustainable GVC performance. Using survey data f rom 219 K orean m anufacturing a nd e xporting f irm s, i t w as c onfirm ed t hat t he i nternational entrepreneurial orientation has positive effects on sustainable GVC performance. This study has the academic implication in expanding the leading factor of GVC performance focused on the network perspective to entrepreneurial orientation. The findings also provide managerial effects in suggesting that it is necessary for firms participating in GVC to take a strategic approach to achieving sustainable GVC performance through international entrepreneurial orientation.

South Africa's titanium industrial policy: A product space perspective

AbstractSouth Africa is a globally significant player in the titanium raw mineral production industry but does not play a large role in its downstream mineral processing. Since downstream activities generate much higher value added, the government has sought to support the end‐to‐end titanium value chain to capture more value from raw titanium before export through ‘beneficiation’‐related policies. This paper applies the input–output product space methodology to generate an overview of those sub‐sectors within the titanium value chain that are likely to support long‐term economic growth in South Africa. We then evaluate whether the selected global value chain activities are supported by the current industrial policy and/or whether a focus on currently excluded global value chain activities is recommended. Our results confirm that although beneficiation appears to make sense in the titanium industry in South Africa, it should (from a product space perspective) be applied neither automatically nor sequentially moving down the value chain. The paper concludes with the shortcomings of the approach and various avenues for future research.

Does servicification of manufacturing increase the GVC activities of firms? Case of India

AbstractDoes greater use of services’ inputs in manufacturing increase the global value chain (GVC) activities of the firms? In this study, we analyse the effects of servicification on the GVC activities of manufacturing firms in India. Using panel data of 4608 Indian manufacturing firms from 2001 to 2018, we examine the effects of servicification of manufacturing firms on their decision to participate in GVCs. The study examines the overall service inputs in manufacturing activities and its impact on GVC activities of firms. The results indicate that servicification of manufacturing tends to have a positive impact on GVC activities of firms. We also observe positive impact on Indian small and medium enterprises (SMEs) to participate in the GVC through the servicification of manufacturing. Further, the results also indicate the differential impact of servicification between high‐ and low‐technology industries.

Impacts of digital business on global value chain participation in European countries.

As the first empirical study of the nonlinear effects of digital business on global value chains (GVC), we provide insight into the nonlinear effects of digital business on the global value chain (GVC) values. We employ four indicators, including the value of online selling, sales through E-commerce, and customer relationship management (CRM) usage, to capture the prevalence of digital business in the economy. By testing a sample of 25 European countries that have been analyzed using various econometric techniques over the period 2012–2019, our estimation results confirm that GVC values are a U-shaped function of digitalization. That is, an increase in digitalization pervasiveness initially induces more significant risks and uncertainties, hindering European countries from getting involved in or scale-up within the GVC. However, a rise in digitalization pervasiveness goes beyond a specific threshold, which facilitates GVC activities as more opportunities are created. Furthermore, our findings suggest that digital business contributes significantly to reducing the adverse influences of global uncertainty on the GVC values, while the marginal effects of digital business on GVC values become more pronounced in countries with the most advanced institutional structure.

Global value chains over business cycles

Global Value Chains (GVCs) now represent a key aspect of economic interdependence across countries. This paper makes two methodological contributions. First, it proposes a framework with which to decompose total production activities at the country, sector, or country-sector level into different types depending on whether they are for pure domestic demand, traditional international trade, simple GVC activities, and complex GVC activities. Second, this work proposes a set of GVC participation indices that improves on measures used in the literature. Upon applying this framework to Inter-Country Input-Output Tables, we find a number of interesting patterns connecting value chains and business cycles. First, the composition of global production has evolved dramatically since 1995. Second, production activities of complex GVC activities comove with global business cycles more than other types of production activities. Third, the level of GVC participation affects the performance of economic growth.

Global Value Chain: Islamic Economics and Finance Position

The growing number of Muslim populations promotes significant development on Islamic economic and finance activities called halal industry. While the halal industry is experiencing positive growth in the last four years, the Global Value Chain (GVC) – the chain of system that drives international trades and global economic activities – remains stagnant. The present study aims to explain the position of the Islamic economics and finance in the GVC. This study employs a qualitative-descriptive method with systematic literature review approach. By collecting secondary data using strict-processing stages and content analysis techniques, the author manages to meet the study’s purpose. The findings suggest that the Islamic economics and finance have opportunities to boost countries' participation in the GVC activities by harmonizing halal standardization, enhancing financial infrastructures, and providing various financial products. This study contributes to generate government policies and enterprises' decisions in developing the Islamic economics and finance within the GVC framework. It further provides initial insights and potential topics for future studies.

Disruptions in global value chains due to COVID-19: stylized facts and policy lessons

This paper provides an early assessment of global value chains (GVCs) amid the disruptive effects of COVID-19 on world trade. Using the Asian Development Bank’s updated Multiregional Input-Output Table, key indicators were estimated to identify important stylized facts about the contraction of GVC activities in 2020. Econometric models were also estimated to analyze the disruptive effect of COVID-19 outbreaks and stringent containment measures on GVC trade. The input-output analysis confirms that all major economic sectors suffered large losses, especially services. However, the bulk of the decline in overall GVC trade can still be traced to lower backward transactions in manufacturing. On the aggregate level, stronger backward GVC participation was associated with relatively milder contraction while the opposite was observed for forward participation. The regressions showed that positive growth of GVC trade was less likely in sectors with relatively larger exposure to foreign downstream shocks. Further, the combined effects of stringent containment measures and severe COVID-19 outbreaks also reduced the probability of growth in both backward and forward GVC transactions. These findings indicate that on top of foreign suppliers’ internal disruptions (foreign supply shock), weak global consumption (foreign demand shock) and local producers’ domestic sourcing problems (local supply shock) contributed to the steep contraction of GVCs in 2020. Against this background, the major challenges to robust recovery were also identified. These include the downside risks of a prolonged pandemic, the resurgence of protectionist tendencies, the strength of global demand, the reconfiguration of broken supply chains, and the ability of countries to coordinate their actions especially with respect to vaccination.

Reevaluation of the carbon emissions embodied in global value chains based on an inter-country input-output model with multinational enterprises

Multinational enterprises actively participate in global production networks. However, the current global value chain accounting framework fails to consider the emissions originating from the production activities of multinational enterprises in the host country and may underestimate the carbon emissions embodied in global value chain activities. This paper proposed an Inter-Country Input-Output decomposition framework that can distinguish domestic firms and multinational enterprises and recalculated global value chain emissions including emissions embodied in international trade (trade-related GVC emissions), foreign direct investment (FDI-related GVC emissions), and both (trade and FDI related GVC emissions). We found that 1) the carbon emissions originating from global value chain activities were underestimated by about 13.8 percentage points under the original framework in 2016, and a large part was classified as emissions stemming from pure domestic production activities; 2) the FDI-related GVC emissions were notable in high-income economies and high-tech manufacturing sectors; 3) foreign direct investment mainly drove the emissions of upstream domestic firms through the joint domestic production linkage between domestic firms and multinational enterprises, especially in upper-middle-income countries; 4) from 2005 to 2016, the FDI-related GVC emissions increased by approximately 704.6 million tons, which was mainly attributed to the scale effect, whereas the carbon intensity effect caused a reduction. The results of this study exhibit a potential significance for the correct identification of the environmental impacts of global production fragmentation, and support policy decisions on national emission responsibilities and quotas determination, differentiated foreign investment decisions, and cleaner production development.

What contributes to the growth of China’s embodied CO2 emissions? Incorporating the global value chains concept

ABSTRACT Global value chains (GVCs) not only reshape trade patterns but also influence trade-related emissions worldwide. This paper estimates China’s aggregate and industrial embodied CO2 emissions in international fragmentation production networks in 2000–2014, and further adopts the chaining structural decomposition analysis (SDA) incorporating the GVCs concept to identify the effect of production fragmentation on embodied CO2 emissions. In addition, heterogeneities in different trade patterns (i.e. pure domestic, traditional, simple, and complex trades) are also examined. The chaining SDA results show that the increase in GVCs leads to China’s embodied CO2 emissions growth, in which the relocation effect of final products is greater than that of intermediate products. Moreover, China’s embodied CO2 emissions are mainly induced by pure domestic demand, with trade-related activities accounting for less than 30%. Furthermore, the effect of traditional final demand trade activity is outstripping that of those rising from the simple and complex GVCs activities.

The COVID-19 pandemic and the internationalization of production: A review of the literature.

MotivationThe COVID‐19 pandemic has substantially altered the context for cross‐border business. This is reflected in trade flows but the conditions for conducting dispersed production functions across countries are also affected. This “new normal” period presents the need to examine the main problems and challenges in international trade and business.PurposeThe article aims to establish the scope, aspects, and implications of the COVID‐19 pandemic on international trade and on international production by reviewing recent articles which deal with international trade and global value chain (GVC) issues, encompassing both changes that were already taking place and the challenges that began in 2020.Methods and approachThe findings of recent articles on trade flows and changes in GVCs (mainly the period 2019–2021) are described in theoretical terms, compared, and systematically reviewed. Special focus is given to the impact of the pandemic on GVCs, renationalization, and GVCs and the impact of the pandemic on GVC governance, and GVCs in the production of vaccines for the COVID‐19 virus.FindingsA drop in trade was recorded in 2020, alongside the introduction of protective trade policy measures. Reduced GVC activities had a negative impact on welfare and the “renationalization” of GVC‐related activities is not a real solution. For the development of GVCs it is important to find a trade‐off between efficiency and resilience, starting with reorganization (re‐engineering) of GVCs, and probably focusing on regional frameworks. Liberal trade policies are essential to ensure the involvement of GVCs in producing the COVID‐19 vaccines, since the various inputs are produced in different countries.Policy implicationsThe possible directions for the future development of GVCs are elaborated: reshoring, resilience in supply chains, adjustments in governance, diversification, and development of risk‐management strategies. The process of internationalization is not in question, but presents challenges which create the need for adjustments in its future development. Current problems with vaccine production arise in part from the erection of trade barriers and rising nationalism. There is a need for greater cross‐country co‐operation to avoid placing national short‐term interests before long‐term and broader objectives.

Global value chain linkages and domestic value-added content: Empirical evidence

PurposeThis paper aims to examine the relationship between global value chains (GVCs) and domestic value-added content (DVA) in a panel of 58 countries for the period 2005–2015.Design/methodology/approachFirst, the authors quantify the refined measures of GVC linkages by using the Borin and Mancini (2019) decomposition technique. Second, the authors apply the feasible generalised least squares method to test the relationship between GVCs and DVA empirically.FindingsFirst, the authors find that GVC links are crucial to the enhancement of DVA. Second, a study at the sectoral level reveals that GVC links in the primary sector raise DVA whilst reducing DVA in the services sector. Third, the authors find that only upstream activities enhance value-added content. Fourth, the authors note the augmenting role played by national policies in mediating the gains associated with GVCs. Finally, the authors note that the outcomes associated with GVCs are consistent when the sample of countries is divided into groups based on income.Practical implicationsThe results lead us to urge policymakers to promote greater integration of business activities into GVCs to reap their benefits.Originality/valueThis paper contributes to the research on the impact of GVCs on DVA by emphasising the significance of the types of GVC activities and policies that improve DVA.

China’s FTA Trade Partner Selection from the Perspective of Global Value Chain: Base on the Data of Trade Value Added

The construction of free trade areas （FTAs） is an important strategic measure to promote China’s opening up since the 21st century. By the end of January 2021, China had signed 19 FTAs, and the construction of FTAs had begun to take shape. From the perspective of global value chain, how does the development of FTAs affect China’s foreign trade and economic growth? How should China choose the next FTA country objects? Based on the trade value added data of domestic and foreign countries in ADBMRIO and OECDICIO, this paper studies the impact of the number and level of FTAs on China’s trade value added through the expanded trade gravity model.The research shows that the establishment of FTAs has further enhanced the level of trade liberalization and trade facilitation between China and its members. At present, the role of the quantity of FTAs in China’s foreign trade is mainly driven from extensive margin, and the intensive effect of the depth of FTAs on the trade value added needs to be further deepened. Compared with the traditional trade activities, FTAs play a more prominent role in the global value chain activities of China and its member countries. Further studies on the heterogeneity find that, from the perspective of global value chain, the establishment of FTAs between China and developed countries and regions has the greatest driving effect on China’s foreign trade; the countries and regions with a high degree of FTA participation and established FTAs with China after the 2008 financial crisis have also significantly contributed to the improvement of China’s participation and competitiveness in the global value chain; the establishment of FTAs with neighboring and similar countries is still conducive to the improvement of China’s trade value added; but with the development of science and technology, the impact of geographical distance on foreign trade is gradually decreasing. Therefore, China should speed up the global strategic layout of FTAs, further improve the depth of FTA construction while increasing the number of FTAs, and accelerate the pace of FTA negotiations with major economies in the world.The main contributions of this paper are as follows: （1）Based on the traditional literature on the impact of FTAs, it reexamines the impact of FTAs on China from the perspective of global value chain, and analyzes the relationship between FTAs and the global value chain.（2）It expands and improves the existing methods and indicators of FTA hierarchy division, applies them to the analysis of China’s FTA construction, and explores the development and evolution path of China’s FTAs from the text interpretation of each FTA.（3）Based on the global input-output database and global value chain accounting database, it points out the direction of China’s next FTA trade partner selection through the heterogeneity analysis on the impact of the quantity and level of FTAs on China, and makes up for the lack of research in the field of FTA strategic choice.