Global Value Chain Integration Research Articles

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

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.

Building new business models in MSMEs: digital capabilities, global value chains integration and the moderating role of entrepreneurial failure

PurposeThe research aims to explore the relationships between the digital capabilities of micro, small and medium enterprises (MSMEs), their participation in global value chains and their adoption of innovative business models. Additionally, the study investigates how the prior experiences of entrepreneurial failure may influence or moderate these relationships.Design/methodology/approachTo address these research objectives, the study draws upon data obtained from the Flash Eurobarometer 486 survey, a comprehensive dataset that explores the challenges faced by 13,197 European MSMEs as they navigate the complexities of growth, the integration of sustainable business models and the incorporation of digital technologies. To test the proposed hypotheses, the research employs multivariate logistic regression analysis.FindingsDigital capabilities are found to be positively associated with business model innovation, while integration into global value chains is linked to a higher likelihood of implementing new business models. Interestingly, entrepreneurial failure did not significantly influence the relationship between digital capabilities and the adoption of new business models. In contrast, entrepreneurial failure significantly moderated the impact of global value chain inclusion on business model innovation, particularly in MSMEs with a history of failure.Originality/valueThis article provides practical guidance to entrepreneurs and companies interested in enhancing their digital strategies and engagement in global value chains, considering the entrepreneurs' business histories.

Learning-by-exporting in South Africa: The influence of global value chain (GVC) participation and technological capability*

Using the South African Revenue Service and National Treasury firm-level panel data for 2009–2017, this paper investigates how trade related to the global value chain (GVC) affects the performance of manufacturing firms in South Africa. The paper uses extant classifications of internationally traded products to identify different categories of GVC-related products and compares the productivity premium of international traders for these different categories. Also, the paper investigates possible differences in learning-by-exporting effects across the identified categories of GVC-related products by estimating the effect of exporting before and after entry into foreign markets. The results confirm that GVC-related trade is associated with a higher productivity premium compared with traditional trade. However, within the categories of exporters, only the firms that trade in GVC-related products and simultaneously engage in research and development in the post-entry periods appear to learn from exporting. Our results underscore the gains of GVC integration in terms of the associated productivity premia and highlight the need for GVC-integrated firms to invest in building technological capacity.

How the adoption of industry 4.0 technologies is related to participation in global and domestic value chains: Evidence from Russia

This study explores the relationships among Industry 4.0 technologies, their application areas, and the involvement of Russian manufacturing firms in global and domestic value chains. We apply logit and multinomial logit regressions using an original survey dataset of approximately 1700 Russian manufacturing firms. We make a novel contribution to the literature by uncovering an asymmetry in adopting Industry 4.0 technologies among Russian industrial firms in domestic value chains (DVCs) and global value chains (GVCs). This asymmetry has the potential to impede GVC localization and DVC internationalization. Based on our results, software automation solutions are the only ones demonstrating statistical significance for firms participating simultaneously in GVCs, DVCs, and both GVCs and DVCs. Companies in DVCs demonstrate a broader utilization of Industry 4.0 technologies across various application areas. We also identify evidence of reshoring in DVCs, indicating that Industry 4.0 adoption encourages firms to establish enduring relationships with domestic suppliers. Highlighting that differences in technology adoption are influenced by external factors, including adherence to international standards and regulatory principles, we propose policy implications for developing countries. Recommendations encompass reducing entry barriers to DVCs, improving procurement transparency, and promoting competition in the digital solutions market to empower firms for seamless GVC integration.

Global value chain integration and non-tariff measures

This paper investigates the degree to which domestic value added embodied in gross trade determines the formation of non-tariff measures (NTMs) imposed at the border and regulatory differences in technical regulation. We apply a recently developed political economy model of trade policies and global value chains to indicators of NTM restrictiveness. Our results demonstrate that higher domestic value added content in imports lowers policy makers’ incentives to impose trade restrictive NTM policies in a similar way as tariffs. These effects are heterogeneous with respect to sectors and income group of the policy-imposing country.

Technology, global value chains and functional specialisation in Europe

This paper provides empirical evidence on the role of technology in affecting the relationship between the participation of EU countries and industries in Global Value Chains (GVCs) and their employment structure over the period 2000–2014. The empirical analysis is based on country-sector level data for 21 EU countries on employment, trade in value added, patents and investments in intangible assets, and focusses on backward linkages within GVCs. The role of technology is analysed by taking into account both the technological intensity of country-sectors participating in GVC and that of their GVC partners. We study the employment structure by looking at the shares of managers and manual workers, which reflect the “functional specialisation” of the country-sector within GVCs. We find that participation in GVC per se is not related to the employment structure of a country-sector. We show that different patterns of GVC integration and functional specialisation emerge that depend on the initial patents/intangibles intensity of the country-sector integrating in GVC and those of the partners.

Does Global Value Chain Integration Enhance Export Competitiveness? Evidence from Indonesia’s Industry-Level Analysis

ABSTRACT We investigate the association between global value chain (GVC) integration and export competitiveness for 34 Indonesian industries from 2007 to 2020. Using panel unit root, panel cointegration, panel long-run estimator, and panel granger causality, we find the following key findings: First, we find that GVC integration and export competitiveness are cointegrated or share a long-term association. Second, we find that GVC integration favorably impacts export competitiveness over time. Third, we confirm the existence of a unidirectional causal link between GVC integration and export competitiveness. Fourth, we also discover results linked with the kind of GVC integration (forward, backward, and two-sided) and the industry type (manufacturing, services, labor-intensive and capital-intensive industries). These findings aid policymakers in the formulation of suitable measures to enhance GVC integration to strengthen the export competitiveness of Indonesian industries.

A journey toward global value chain upgrading: Exploring the transition from backward to forward integration

Global value chains (GVCs) are embraced worldwide as a gateway to technological and economic upgrading. Countries integrate into backward, value-importing linkages with the aim of accumulating technological capabilities and transitioning towards creating their own forward, value-exporting chains and capturing a greater share of the value generated within GVCs. Existing knowledge, which is largely fragmented and descriptive, points to a number of uncertainties and complexities that make this process anything but linear. It is open question whether the deepening backward linkages facilitates forward integration in GVCs. Using data from 65 countries over two decades, we show that the impact of backward integration on forward integration in GVCs varies over time and that it is moderated by the level of development of the country, the diversity of the GVC partner network and the innovation conditions in the home market. The research adds a new perspective to the literature on GVC-driven upgrading.

An international interface: Democratic planning in a global context

There has been a renewal of discussions about alternative economic systems in recent years. Democratic planning has received a lot of attention, especially in view of the way it could help address social and ecological challenges. However, little has been written about how a democratically planned economy could relate to other economies through trade or financial flows. This lack of interest is surprising, considering that any country aspiring to plan its economy democratically would have to take into consideration its integration in global value chains and that few would likely aim for complete autarky once fully democratized. In this article, we address this issue by delineating five principles that an institution responsible for international economic relations should follow in a democratically planned economy and giving an example of how it could function in practice.

Productivity and Global Value Chains: A Tale from the Indonesian Automobile Sector

Low productivity and quality of employment have always been a big problem in Indonesia, caused by the lack and mismatch of skills in the workforce. Labor productivity (LP) describes the company’s ability to produce something. This can be determined by added value or output. Several factors influence LP, such as education, age, and training. The concept of global value chains (GVCs) has become an integral part of economic activity, and trade within global production networks has grown more rapidly than conventional trade in final goods. GVCs have both positive and negative impacts on employment opportunities. The automotive industry is categorised as one of the ten primary priority industries in the Indonesian manufacturing sector. This research analyses the impact of LP on GVC integration in the Indonesian automotive industry. The data used in this research comes from the World Input–Output Database (WIOD) and the Central Statistics Agency (BPS) from 1995 to 2014. The variables used include the number of workers, added value, real wages, and GVC, which were calculated by the author using the Inter-Country Input–Output (ICIO) approach. Using ICIO analysis, the following matrix should be constructed to determine involvement in GVCs. This research shows that LP in the Indonesian automotive industry has a positive trend, and the GVC position in the Indonesian automotive industry has a positive trend line. The domestic value chain increased from 4% to 33%. This improves the ability to produce higher value-added and intermediate export goods. LP increases the domestic value chain in the Indonesian automotive industry, leading to global value chain integration. Thus, LP goes hand in hand with integrating GVCs.

Automation, global value chains and functional specialization

AbstractWe study how technology adoption and changes in global value chain (GVC) integration jointly affect labor shares and business function specialization in a sample of 14 manufacturing industries in 14 European countries in 1999–2011. Increases in upstream, forward GVC integration directly reduce labor shares, mostly through reductions in fabrication, but also via other business functions. We do not find any direct effects of robot adoption; robotization affects labor only indirectly, by increasing upstream, forward GVC integration. In this sense robotization is “upstream‐biased”. Rapid robotization in China shaped robotization in Europe and, therefore, relative demand for labor there.

Power, governance, and global value chains: case studies on NGO agri-food innovation intermediaries in the Philippines

ABSTRACT Participation and integration in Global Value Chains (GVCs) is critical for industrial development, especially for developing economies in key sectors such as agri-food businesses (AFB). However, doing so optimally is difficult due to inherent power imbalances between GVC actors. Innovation intermediaries may support the upgrading and opportunities of less powerful actors by working between processes and institutions while exercising a mix of bargaining, demonstrative, institutional, and constitutive powers. By doing so, they can theoretically reconfigure chain governance structures. However, little research has been done on how precisely innovation intermediaries exercise these powers and to what ends. This study conducts case studies on two AFB non-government organisations (NGOs) in the Philippines, employing focus group surveys, semi-structured interviews, and content analysis to examine how they exercise different types of power to better their partners’ GVC position. We find that both NGOs employ these powers in diverse ways and to varying degrees over time. Our results reveal the critical importance of active value chain participation by non-firm actors in influencing the balance of power within GVCs and in shaping government response. These results have implications for theoretical and policy debates concerning GVCs and innovation intermediaries, both generally and in developing economy contexts.

The Effects of Global Value Chain on Export Survival

This article uses panel data with 6,743 country-year observations to investigate the effects of participation in the global value chain (GVC) on export survival rate for the period 2005–2014. GVC participation is measured as the value addition embedded in exports, looking both backward and forward from a reference country. The empirical results show that both backward and forward linkages have positive effects on the chance of export survival; these effects are persistent and increasing over time, and they become more pronounced when taking the endogeneity issue into account. On the policy front, the preceding findings suggest that governments should implement policies to upgrade a country to GVC integration in order to enhance the sustainability of exports.JEL Codes: F10, F14, C41

Impact of global value chains on tariffs and non-tariff measures in agriculture and food

We analyse whether global value chains (GVCs) reduce trade barriers in the agricultural and food sectors as they affect lobbying and government incentives. Political economy theory predicts that tariffs will be lower in countries integrated in GVCs and that the effect will be stronger outside regional trade agreements (RTAs). We use data from 1995 to 2015 from 160 countries on tariffs and non-tariff measures (NTMs) in the agri-food sector. Our evidence indicates that GVC integration, measured as domestic (foreign) value added in foreign (domestic) final goods, does affect trade policy. Stronger GVC integration is associated with lower tariffs, but mainly outside RTAs, and lower NTMs, both inside and outside RTAs.

The impact of China's trade and FDI on Africa's GVC participation and economic upgrading

PurposeThis study examines the impact of China's trade and foreign direct investment (FDI) on Africa's global value chain (GVC) participation and economic upgrading.Design/methodology/approachThe study covered 48 African countries, cutting across the western, eastern, central, southern and northern subregions to cover the heterogeneity of the continent. The study adopted feasible generalized least squares panel VAR-Granger causality Wald test and system generalized methods of moments techniques for estimation.FindingsOverall, China's FDI to Africa and US-Africa trade have a linear relationship with Africa's GVC involvement and economic upgrading. The findings suggest that although China-Africa trade has a positive impact on GVC engagement and upgrading, the marginal effect decreases in the face of US-Africa and EU-Africa trade.Originality/valueThis study provides new evidence on the impact of China's FDI and trade on African economies' GVC participation and economic upgrading. To the best of the authors’ knowledge, this is the first study to empirically explore the effects of China's FDI and trade on Africa's GVC integration and economic upgrading as well as from the perspectives of backward and forward GVC participation. Furthermore, the study empirically examines whether the effects of Africa's economic cooperation with China relative to its GVC engagement differ from those of Europe (EU) and the US via a comparative regression.

Changes in automotive value chain participation on the integrated periphery – The case of Czechia and Hungary

AbstractCentral and Eastern European countries, including Czechia and Hungary, have become parts of the integrated periphery in the automotive industry. Through input-output analysis, company data and interviews, the article reveals the determining role of the industry in both economies and their deep integration in global value chains (GVCs). In addition to these similarities, the analysis reveals that domestic, simple and complex global value chain performances, ownership structures, the scale and types of upgrading tendencies as well as the consequences of the appearance of newcomers in the industry show different patterns of GVC structures over time. Due to these, the development paths of the two countries widely differ.

Distributive Profiles Associated with Domestic versus International Specialization in Global Value Chains

The present article sets out trends in functional income distribution implied by countries’ integration in Global Value Chains (GVCs), taking also into account interregional interactions (North-North, South–South and North–South). Through the application of an innovative input-output methodology, it quantifies inter-country differences in functional income distribution by means of a novel indicator to estimate the distributive profile associated with domestic vis-à-vis international specialization. The focus is on trade flows, and the analysis carried out allows to single out the distributive implications of alternative regional integration projects, in view of a more inclusive multilateral trade system.

The trade effects of product market regulation in global value chains: evidence from OECD and BRICS countries between 2000 and 2015

Global Value Chains (GVC) have reshaped the landscape of international trade. The quality and intensity of regulation significantly impacts firms' competitiveness and their ability to engage in GVC. Economic literature suggests that regulation of product market competition has a detrimental effect on trade by decreasing productivity, innovation, and economic growth. This paper expands existing knowledge on this relationship by examining the influence of product market regulation (PMR) on value-added trade flows in an augmented gravity model. We constructed a data panel with trade data from 40 OECD and BRICS countries in the period from 2000 to 2015 and combined it with an extensive multi-level indicator set on PMR developed by the OECD. By disentangling the PMR indicators, we account for the heterogeneity of regulation and potential different trade effects. Overall, our evidence suggests that PMR has a negative impact on trade. Further, our results indicate that the negative impact stems largely from barriers to trade and investment. For the BRICS, our results suggest the contrary: We observed an overall positive trade effect of PMR, mainly driven by barriers to trade and investment. Our results support identifying policy areas in which regulatory reform can improve the integration in GVC and emphasize different approaches to economic policy, particularly in emerging economies such as the BRICS. Moreover, the results underline the detrimental effects of increasing protectionism and tariff hikes, a phenomenon that we increasingly observe in recent years from the world’s largest economies, such as the United States and China.

Gain or Loss from this Turn’s Rate Hike: Evidence from Tesla and USD Index

A series of grave problems caused by energy scarcity and environmental pollution have gradually become the focus of governments and automobile manufacturers, and all countries agree that energy saving, and emission reduction are the inevitable directions of the future development of industrial automobile technology. As a global pioneer of new energy pure electric vehicles, Tesla has created a new concept of using Internet thinking to produce cars. At the same time, under the influence of the epidemic disturbance and the conflict between Russia and Ukraine, the supply and demand of global commodities such as crude oil and grain are tense. In addition, the Fed has raised interest rates for three rounds since June 2022, leading to rising inflationary pressure in the global market. Rising cost pressure in industries with a high degree of global value chain integration (such as automobiles, batteries, and mechanical equipment) and Tesla's earnings are also affected by exchange rate fluctuations. This paper uses the VAR model to explain the dynamic relationship between the exchange rate of USD/offshore RMB and Tesla stock price, establishes the ARMA-GARCH model to predict and analyze how the change of exchange rate affects the volatility of Tesla stock returns, and predicts the impact on industrial enterprises like Tesla.

Viewpoints in Global Value Chains: Evidence from Sub-Saharan Africa

The aim of this paper is interrogate various perspective such as Investments, Infrastructure, Governance and Macroeconomic factors and how they influence global value chains in sub Saharan Africa. Data was derived from 37 sub Saharan Africa countries for the period 2003 to 2018. Panel corrected Standard Errors estimation model was adopted in analysis. Both the direct relationships and controlled relationships were tested. Macro-economic factors such as GDP growth rate, exchange rate, inflation rate and Interest rates were used as controlling factors. The paper established a significant influence of Investments on Global value chains and that it can explain up to 45 per cent of the variation. Similarly, infrastructure has a significant influence on global value chains in sub Saharan Africa and that it can explain up to 67 per cent of the variations. Governance also has a significant influence on global value chains and it can explain up to 10 per cent of the variations. The overall model was significant with a 76 per cent explanation of the variation in global value chains in sub Saharan Africa. Therefore, the paper recommends for a promotion of value added manufacturing, and an integration in global value chains. Further, the paper recommends for enhanced resource allocation to infrastructure development to aid in the reduction of the production cost and to stream line governance.