Value Chain Upgrading Research Articles

Bilateral value chain reshaping through regional trade agreements deepening: Evidence from belt and road countries

This paper investigates the impact of Regional Trade Agreements (RTAs) on the reshaping of value chains from both domestic and regional perspectives by using national-level data from the Belt and Road countries. The findings indicate that the depth of RTAs among Belt and Road countries can not only enhance regional integration characterized by regional value chain inter-connections and promote the value chain upgrading of trading partners in the regional production system, but also facilitates the construction of domestic value chains, thus forming a new pattern of bilateral value chain reshaping. The conclusions still hold after addressing the potential endogeneity and robustness concerns. Mechanism test results show that the effects of productivity enhancement and institutional quality improvement are important channels for RTAs-deepening to promote value chain reshaping. Heterogeneity test results indicate that ‘WTO-X’ provisions of RTAs are more conducive to promoting value chain reshaping, and the promoting effect of RTAs-deepening on value chain reshaping is more significant for the manufacturing industry. These findings have important policy implications to further expand high-level opening-up, deepen RTAs provisions and actively participate in global governance.

Technology transfer and global value chain upgrading of manufacturing firms: Evidence from China

Breaking through the predicament of "low-end lock-in" and achieving the upgrading of enterprises within the global value chain (GVC) is a critical issue in the study of internationalization strategies for enterprises in emerging economies. This paper uses China, a quintessential representative of such economies, as a case to explore how technology transfer can facilitate the upgrading of enterprises' GVCs. This research aims to reshape the international strategic positioning of Chinese enterprises by promoting the integration and development of technology transfer and the GVC. Utilizing patent data from Chinese manufacturing enterprises, as well as data from Chinese industrial enterprises and customs records from 2004 to 2014, this study empirically examines the relationship between technology transfer and the upgrading of enterprises' GVCs. Additionally, the moderating effect of industrial agglomeration is incorporated into the research framework.The findings reveal that both technology transfer in and technology transfer out significantly positively influence the upgrading of enterprises' GVCs, highlighting the crucial role of technological knowledge flow in enhancing enterprise positioning within the GVC. Furthermore, industrial agglomeration is shown to exert a positive moderating effect on GVC upgrading as a result of technology transfer out. This study provides valuable insights for policymakers, enterprise managers, and academics, enabling a more nuanced understanding of the pivotal role of technology transfer in reshaping GVCs. Consequently, it offers robust support for the internationalization strategies of Chinese enterprises.

Digital Transformation and Green Innovation Synergy: Double Drivers for Global Value Chain Upgrading in China's Construction Machinery Industry

With the digital transformation of the global economy and the deepening of the concept of sustainable development, China's construction machinery industry faces major opportunities and challenges in the reconstruction and upgrading of the global value chain. Based on the dynamic capability theory and the collaborative innovation theory, this study constructs a theoretical framework of "digital transformation-green innovation-global value chain upgrading" to explore the impact of the synergy between digital transformation and green innovation on improving the position of Chinese construction machinery companies in the global value chain. This study uses a multi-source data fusion method, combined with patent data, financial statements and questionnaires, to construct an unbalanced panel data set of 189 listed construction machinery companies in China from 2010 to 2022, and uses econometric methods such as dynamic panel modeling, threshold regression and machine learning to analyze. The study finds that: (1) The impact of digital transformation on the global value chain upgrading of construction machinery companies presents a nonlinear "U-shaped" curve relationship; (2) Green innovation plays a positive regulatory role in the relationship between digital transformation and value chain upgrading; (3) There is a significant synergy between digital transformation and green innovation ; (4) The quality of the institutional environment has an important impact on the synergy, and a high-quality institutional environment enhances the synergy; (5) Enterprise heterogeneity significantly moderates the impact of synergy on value chain upgrading. The study expands the theory of global value chains, enriches the theory of collaborative innovation, provides a new theoretical perspective for the integration of digital economy and green development, and provides practical guidance for enterprises and governments to formulate relevant strategies and policies. Future research can further explore the cross-national comparison and long-term dynamic evolution of synergy effects.Digital transformation

The Duality of Technological Innovation and Dynamic Capabilities: The Micro-Foundation of China's Construction Machinery Industry's Rise up the Global Value Chain

In the context of global value chain reconstruction, Chinese construction machinery enterprises are facing the dual challenges of technological innovation and global competitiveness improvement. Based on organizational learning theory and dynamic capability perspective, this study constructs a theoretical framework of dual integration of technological innovation (exploratory innovation and pioneering innovation) and dynamic capability, and explores its impact mechanism on the global value chain upgrading of Chinese construction machinery enterprises. The study adopts a mixed research method, combining large-scale patent data analysis and in-depth case study, and constructs a longitudinal data set of 146 Chinese construction machinery enterprises from 2005 to 2022. By using structural equation modeling, dynamic panel regression and machine learning algorithms, this study reveals the following main conclusions: (1) The relationship between technological innovation duality and the global value chain position of enterprises is inverted U-shaped, and there is an optimal equilibrium point; (2) Dynamic capabilities partially mediate the relationship between technological innovation duality and global value chain climbing, among which absorptive capacity and reconstruction capacity are particularly critical; (3) The degree of internationalization of enterprises positively moderates the impact of technological innovation duality on dynamic capabilities; (4) The quality of the institutional environment moderates the relationship between technological innovation duality and dynamic capabilities, and a high-quality institutional environment strengthens the positive relationship between the two. The theoretical contributions of this study are: (1) it expands the global value chain theory and incorporates the duality of technological innovation into the analytical framework; (2) it reveals the mediating mechanism of dynamic capability theory in innovation and value chain climbing, enriching the dynamic capability theory; (3) it provides new empirical evidence for organizational learning theory and clarifies the dynamic process of exploration and utilization equilibrium. At the practical level, the research results provide guidance for engineering machinery companies to formulate innovation strategies and enhance global competitiveness, and also provide a basis for the government to formulate industrial upgrading policies. Future research can further explore the long-term evolution path of technological innovation duality and its differences in cross-cultural contexts.

Addressing Rural Decline: China’s Practices in Rural Transformation and Farmers’ Income Growth

In the context of global rural decline, fostering endogenous momentum through rural transformation to increase farmers’ incomes is a challenge that nations worldwide must address. This study utilizes the 2022 “China Rural Micro-Economic Data” to construct a multidimensional rural transformation index system at the village level, encompassing demographic, land, industrial, social, digital, and ecological transformations. This study evaluates the levels of rural transformation across 15 surveyed provinces in China. Furthermore, it empirically examines the impact of rural transformation on farmers’ incomes, the underlying mechanisms, and the heterogeneity of different transformation models. The findings are as follows: (1) Coastal economically developed regions exhibit higher levels of rural transformation, while inland agricultural provinces show significant lag; (2) Rural transformation effectively promotes the upgrading of agricultural value chains, increases farmers’ market participation, and enhances their access to financial services, thereby boosting farmers’ incomes; and (3) The impact of different transformation models on farmers’ incomes varies significantly; industrial, social, and demographic transformations contribute most prominently to income growth. While digital transformation shows some positive effects, it remains relatively limited. Land and ecological transformations have yet to demonstrate a significant positive impact on farmers’ incomes.

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.

Smallholder Challenges of Social and Economic Upgrading in Agricultural Value Chains: A Cross-country, Cross-crop Comparison

This study is based on field research conducted by an international team of researchers investigating the opportunities for social upgrading of smallholder farm owners and tenants and their workers in the Global South. The main objective has been to assess the influence of crop characteristics, end markets, and value chain governance (including product and process standards), as well as national political, economic, and cultural contexts, on the conditions of farmers and farmworkers. Accordingly, the selected crops differ along the axes of domestic versus international end markets and short versus long shelf-life: coffee (cash crop), rice (staple crop), and mangoes (perishable crop). The selected countries are Bangladesh, Brazil, Colombia, Ghana, India, Pakistan, and Vietnam. Our main findings relate to the importance of collective action by key stakeholders, including smallholders and a supportive state, for economic and social upgrading.

Improving financial productivity and upgrading in global value chains

This study integrates the financial productivity improvement in a multi–country, multi–sector Ricardian model to examine its impact on China's position within global value chains (GVC). We also differentiate between the trade elasticities of the financial sector concerning intermediate inputs and final consumption. Through counterfactual analysis, our research reveals a consistent upward trajectory in China's GVC positioning at aggregate and sectoral levels that is attributable to financial productivity improvement. This ascent is facilitated by input–output links and cost-saving effects. The findings validate the significance of financial productivity improvement in advancing China's GVC positioning.

Financial Sector Liberalisation and the Climbing of Manufacturing GVCs

The National 14th Five-Year Plan and 2035 Vision Outline emphasise the need to promote the integration of China's manufacturing industry and service industry, so as to achieve the upgrading of China's manufacturing industry to the high end of the global value chain. Based on the OCED input-output data and the World Bank STRD data, the study empirically explores the impact of financial sector openness on the upgrading of the manufacturing industry's global value chain by using the global multiregional input-output model and the panel model. The study finds that both the quantity and quality of financial sector openness have a significant effect on the upgrading of manufacturing GVCs, with the quality of financial sector openness having a more pronounced effect, and this conclusion still holds after considering robustness; accordingly, it puts forward policy recommendations for financial sector openness to promote the upgrading of manufacturing GVCs.

Do water risk management strategies lead to environmental upgrading in global value chains? A view from South Africa's export fruit industry

Environmental upgrading is becoming increasingly important in terms of leveraging sustainability in global value chains (GVCs). Existing research focuses on environmental upgrading as a process, while the drivers and outcomes often remain unclear. We address this limitation through a qualitative case study of the South African fruit industry based on interviews and documents, where we investigate the drivers and outcomes of environmental upgrading strategies with a focus on irrigation water use and sustainability. We share three important findings in our paper, which contribute to the literature. First, we identify environmental risk as an important driver for environmental upgrades that has so far been overlooked. Second, we question the current focus of environmental upgrading strategies on technological interventions. Focusing on technological interventions alone, however, is insufficient to address local and global challenges regarding water resources sustainability. Our third finding emphasises the need to consider the wider environmental and political economic context within which environmental upgrading takes place. This is because environmental upgrading strategies can actively contribute to the development of environmental risks for other actors, within or beyond value chains, and therefore have clear limits in their contribution to increasing sustainability.

The driving effect of technological innovation on green development: From the perspective of efficiency

Green development is considered to be an effective way to achieve win-win between economy and environment, and technological innovation is the core driving force of green transformation development. High-tech industries are the core industries of industrial technology and economic development, and their technological innovation ability and green development level are important supports for optimizing the national industrial structure and promoting the green transformation of industries. Therefore, based on the concept of innovation and green development, this paper analyzes the industrial development rule from the perspective of the interaction mechanism between technological innovation and green development, to provide theoretical reference for the design of corresponding development strategies and planning. Hence, NSBM model is constructed to evaluate the efficiency of multi-stage technology innovation and deconstruct the evolution law of technology innovation value chain of high-tech industry. Secondly, GML model is used to evaluate green total factor productivity and clarify the green and high-quality development status of high-tech industry. Finally, the truncated regression model is constructed to analyze the factors affecting the external environment of green transformation development. The results indicate that the upgrading of technology innovation value chain is conducive to promoting green transformation development.

Inclusiveness of Tanzania’s small-scale jewellers into global value chains: exploitation of artisanal industrial clusters

PurposeIn developing countries like Tanzania, gems and jewellery industry mainly consists of disintegrated and unstable micro and small workshops which operate in a way that misalign value addition processes. This study is aimed to bridge gap by focussing on exploitation of industrial clusters in social normalisation and economic resilience to developing countries. The world economic shocks has been not only individually experienced but also globally shared while disrupted lives across all countries and communities and negatively affected global socio-economic growth.Design/methodology/approachFurthermore, the explorative design was adopted in this study in order to explore needs of respondents, and with the aim to direct the study towards a descriptive design. The sample frame consists of participants in gems and jewellery activities in Tanzania whereby sample was drawn from Dar es Salaam and Arusha. Semi-structured interview was used to collect quantitative data to establish evidence of Tanzanians’ SSJs linked to global value chains (GVCs).FindingsResults revealed the benefits of exploitation of artisanal industrial clusters to Tanzanians’ SSJs when linked to global value chains (GVCs). Findings of the study demonstrate the importance of artisanal industrial clusters in facilitating Tanzanians’ SSJs to access GVCs. Further, insufficient education, trust and social protection directly affects inclusive GVCs, inferring that the impact of artisanal industrial clusters on inclusive GVCs in social normalisation and economic resilience.Research limitations/implicationsStudy findings reveals shortcomings in existing regulatory framework of linking Tanzanians’ SSJs to artisanal industrial clusters, for improvements to better support the inclusiveness in GVCs. Findings of this research invite interventions on institutional capabilities and entrepreneurial competencies to enhance the capabilities of small-scale jewellers (SSJs). Like other studies, this study involved cross-sectional data, limit targeted study population as representative of SSJs in industrial clusters and GVCs in economic crises at limited time.Practical implicationsThe study findings makes important practical contributions to the Tanzania’s SSJs by examining mediating role of artisanal industrial clusters hence informing policymakers of mining sector how to improve accessibility on GVCs by focus on offering great institutional capabilities and entrepreneurial competencies. These findings will help SSJs and policy makers to get better understanding of the relationships in exploitation of artisanal industrial clusters when accessing GVCs. Therefore, they can make better decisions on implementing artisanal industrial clusters as well as management accessing GVCs, so that SSJs will attain the best possible performance.Social implicationsThis emphasises the importance of community empowerment in the GVCs process through artisanal industrial clusters. Study findings indicate the influence of industrial relations to social dynamics which are previously inadequately addressed and scantly researched. In actual fact study propose initiatives that ensure local communities benefit socially from the integration of SSJs into GVCs through artisanal industrial clusters. Findings suggest local communities that take into account inter-sectionality of artisanal industrial clusters and inclusive GVCs, by considering how factors like education, trust and social protection status intersect to influence the social inclusiveness of SSJs.Originality/valueThere is limited evidence of linking Tanzanians’ SSJs to GVCs in social normalisation and economic resilience and few researchers have explored this topic. This article leverages exploitation of industrial clusters in normalisation and economic resilience to developing countries such as Tanzania as way of improving shared prosperity, sustainability, inclusive growth, cohesion, value chain upgrading and financial inclusion to SSJs.

Smart Cities and Global Value Chain Upgrading: Evidence from China

China has been on a new journey pursuing high-quality development, an important element of which is global value chain (GVC) upgrading. The smart city pilot policy, which aims at reshaping the urban development model in China, is carried out and regarded conducive to achieving high-quality development. Nevertheless, regarding whether and how smart cities could promote GVC upgrading, research is scant. We adopted the approach of time-varying difference-in-differences (DID) and used a dataset that encompassed 174 prefecture-level cities between 2005 and 2017 to investigate the impact of China’s smart city pilot policy on the GVC upgrading of cities. The findings indicate that, firstly, GVC upgrading is significantly enhanced by building smart cities in China. Secondly, this favorable influence on GVC upgrading is mainly through channels of informatization, innovation, and industrial structure adjustment. Thirdly, the influence is more pronounced in eastern cities and cities with better conditions in terms of human capital, fiscal capacity, and information infrastructure. This research provides evidence and policy implications for China to move forward with the smart city establishment in a bid to upgrade GVCs and achieve high-quality growth.

The Mechanism of Digital Economy in Promoting the Transformation and Upgrading of China’s Manufacturing Industry

The era of China's digital economy has arrived, Chinese government is actively exploring how to use the technological changes brought about by the digital economy to promote China's economic development in the next 30 years. As the pillar industry of China's economy, manufacturing has maintained rapid growth in the past 30 years and has made great contributions to China's economic development. However, there are also many challenges at present, such as,China's manufacturing industry is at the low end of the global industrial chain, and the added value is very low; Backward technology and poor competitiveness in the international market. In this context, this paper analyzes the impact of the digital economy on the transformation and upgrading of the manufacturing industry from a qualitative perspective ,attempts to explore the way how China's manufacturing industry can use digital technology to achieve intelligent transformation, value chain upgrading, and industrial structure upgrading, so as to achieve comprehensive transformation and upgrading , in the end, gain long-term development momentum.

How does manufacturing servitization effect global value chain upgrading? Tests based on the dual perspectives of “participation” and “division position”

Manufacturing servitization has become an important trend in the development of global manufacturing. Under the policy goal of global value chain upgrading, it is of great significance to discuss how manufacturing servitization affects the participation and position in global value chains (GVCs). Based on the OECD Input-Output Tables (OECD-ICIO) from 2008 to 2018, we calculate the level of manufacturing servitization in major economies. At the same time, based on the TIVA database, two indicators reflecting the upgrading of the global value chain are calculated from the dimensions of “participation” and “division position”. This paper empirically examines the mechanism and effect of manufacturing servitization on the upgrading of GVCs. Our findings reveal the following: (1) Manufacturing servitization has a significant enhancement effect on global value chain upgrading. (2) Manufacturing servitization can affect the upgrading of GVC through “cost reduction effect, technology spillover effect and specialization effect”. (3) Manufacturing servitization in developing countries has a greater promoting effect on the upgrading of GVC(4) For manufacturing industries with different levels of technological development, the promotion effect of manufacturing servitization on high-tech industries is more obvious. This paper has two main implications: On one hand, the government should not only increase support for the service sectors, but also promote the innovative development of the service sectors. On the other hand, it is necessary to improve the level of opening up to the outside world, make full use of the positive “spillover effect” of high-quality service elements, and promote the integration of production-oriented services and manufacturing.

The relationship between dynamic capabilities and global value chain upgrading: the mediating role of innovation capability

PurposeThis study examines how dynamic capabilities (DCs) impact global value chain (GVC) upgrading and assesses the mediating role of innovation.Design/methodology/approachThe study uses a quantitative research method. The data are collected using an online questionnaire administered to respondents working in Chinese automobile manufacturers in China and Laos. The data are analyzed using structural equation modeling (SEM) and related software.FindingsThe results show that DCs and innovation capabilities (ICs) positively affect GVC upgrading and that ICs plays a mediating role between DC and GVC upgrading. Dynamic capabilities evolution (CE) mediates the relationship between DCs, ICs and GVC upgrading. Finally, differences exist in the effects of the three dimensions of DCs on ICs and GVC upgrading.Practical implicationsFocusing on the absorption and transformation of knowledge, enterprises could experience a clear enhancement of IC and CE and be more likely to obtain higher marginal returns. The study provides insights for emerging market firms to gain higher added value in internationalization.Originality/valueThis study demonstrates that different dimensions of DCs have different effects on GVC upgrading. In terms of theory, the impact of IC is considered in terms of the mediating effect of CE on IC. Differences are highlighted concerning the impact of learning capability, integrating and coordinating capability and sensing capability on the mediated relationships.

A battery bonanza for the global South? Prospects for economic upgrading in lithium-ion battery value chains in the context of strategic capitalism

This paper assesses global battery value chains and efforts to achieve economic upgrading in these. It provides an outline of the ways in which the global economic order is changing and discusses key concepts which account for that, including strategic capitalism and geoeconomics. The paper suggest that a changed global economic order likely impacts economic upgrading efforts by countries in the global south but precisely how is uncertain. The type of impact might be multifaceted and it may constitute impact of an either positive or negative kind. The paper identifies relevant research questions and explores four different ways that a changing global order may alter conditions for economic upgrading in the battery sector: Ideological shifts, systemic measures to safeguard competitiveness, long term thinking and stewardship of access to major markets.

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.

Do cleaner production standards upgrade the global value chain position of manufacturing enterprises? Empirical evidence from China

The harmonious development of trade and environment is extremely crucial for developing countries that face challenges posed by extensive economic models and environmental pollution as they strive to engage more deeply in the global economy. This article utilizes micro-level data from the Chinese Industrial Enterprises Database (CIED) and the Chinese Customs Trade Database (CCTD) from 2000 to 2012. It takes China's implementation of cleaner production standards (CPS) since 2003 as a quasi-natural experiment and applies staggered DID to investigate the impact and mechanisms of exogenous shocks from environmental policies on upgrading and transformation of enterprise value chains. The aim is to provide comprehensive empirical evidence regarding the availability of environmental regulations and the GVC position of Chinese enterprises. Thus, we also offer valuable insights for similar developing countries seeking a path toward high-quality advancement. The research findings are as follows. First, CPS exerts a significant upgrading effect on enterprise value chains, and this conclusion is highly robust. Second, heterogeneity analysis reveals that the upgrading effect of CPS on value chains is predominantly influenced by factors including the enterprise's asset scale, ownership structure, geographical location, trade pattern, as well as the technological level and pollution intensity within its specific industry. Third, further tests through mechanism analysis reveal that CPS expedited the integration of Chinese manufacturing enterprises in GVC by promoting innovation and R&D capabilities, enhancing total factor productivity, and improving labor wages.

Effect of blockchain technology–supply chain risk fit on new product development performance: The moderating role of supply chain upgrading

As the most disruptive information technology at present, blockchain technology has considerable application potential in supply chain risk management. On the basis of technology–task fit theory, this study aims to theorize and examine blockchain technology and supply chain risk management by proposing a set of research hypotheses. To achieve this, blockchain technology is classified into two main characteristics, namely, traceability and security, and categorized supply chain risks into supply, demand, and process risks. This study also empirically validates the conceptual framework and proposes hypotheses using structural equation modeling, with 355 Chinese manufacturing firms as the research sample. Empirical findings demonstrate that all the three types of risk and the two main characteristics of blockchain (i.e., blockchain traceability and security) positively contribute to the supply chain risk–blockchain technology fit. Results also suggest that the supply chain risk–blockchain technology fit positively affects new product development (NPD) performance. In addition, the relationship between supply chain risk–blockchain technology fit and NPD performance is positively moderated by global value chain upgrading.