Participating to Compete: Do Small Firms in Developing Countries Benefit from Global Value Chains?
Standard trade theory suggests that the profile of exporting firms is characterized by large firms which dominate domestic productivity distribution. Large manufacturing multinationals have increased their productivity by participating, creating and shaping global production networks. In recent deca...
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| Format: | Article |
| Language: | English |
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MDPI AG
2021-02-01
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| Series: | Economies |
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| Online Access: | https://www.mdpi.com/2227-7099/9/1/12 |
| _version_ | 1797416273581178880 |
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| author | Mauro Boffa Marion Jansen Olga Solleder |
| author_facet | Mauro Boffa Marion Jansen Olga Solleder |
| author_sort | Mauro Boffa |
| collection | DOAJ |
| description | Standard trade theory suggests that the profile of exporting firms is characterized by large firms which dominate domestic productivity distribution. Large manufacturing multinationals have increased their productivity by participating, creating and shaping global production networks. In recent decades, trade flows have become increasingly dominated by trade-in-tasks within global production networks. Given the importance of pro-competitive effects in establishing the gains from trade following trade liberalizations, it is important to look at the link between participation in global value chains and a firm’s competitiveness. The paper does so by using the International Trade Centre’s competitiveness index, for small, medium-sized and large firms, coupled with global value chain participation measures extracted from multi-regional input-output tables, and together forming a panel dataset at country and firm category level. The main finding establishes that the gains from integration into value chains are greater for small firms than for large firms. In particular, at the sample median, an increase of participation by 2.5% reduces the competitiveness gap between small and large firms by 1.25%. In addition, the analysis suggests that it is the use of foreign inputs that drives the result. In contrast, the domestic value in intermediate goods matters only in cases where value chains respond to domestic demand needs. The identification strategy relies on a fractional probit model allowing for unobserved effects, and a causal framework using the depth of trade agreements as instrument, in order to mitigate potential reverse causality. |
| first_indexed | 2024-03-09T06:01:02Z |
| format | Article |
| id | doaj.art-39363af170904204842f9753098434b1 |
| institution | Directory Open Access Journal |
| issn | 2227-7099 |
| language | English |
| last_indexed | 2024-03-09T06:01:02Z |
| publishDate | 2021-02-01 |
| publisher | MDPI AG |
| record_format | Article |
| series | Economies |
| spelling | doaj.art-39363af170904204842f9753098434b12023-12-03T12:08:45ZengMDPI AGEconomies2227-70992021-02-01911210.3390/economies9010012Participating to Compete: Do Small Firms in Developing Countries Benefit from Global Value Chains?Mauro Boffa0Marion Jansen1Olga Solleder2Executive Office, Research & Strategy Programme, International Bureau, Universal Postal Union, Weltpoststrasse 4, 3000 Berne 15, SwitzerlandDepartment of Market Development, International Trade Centre, Palais des Nations, 1211 Geneva 10, SwitzerlandDepartment of Market Development, International Trade Centre, Palais des Nations, 1211 Geneva 10, SwitzerlandStandard trade theory suggests that the profile of exporting firms is characterized by large firms which dominate domestic productivity distribution. Large manufacturing multinationals have increased their productivity by participating, creating and shaping global production networks. In recent decades, trade flows have become increasingly dominated by trade-in-tasks within global production networks. Given the importance of pro-competitive effects in establishing the gains from trade following trade liberalizations, it is important to look at the link between participation in global value chains and a firm’s competitiveness. The paper does so by using the International Trade Centre’s competitiveness index, for small, medium-sized and large firms, coupled with global value chain participation measures extracted from multi-regional input-output tables, and together forming a panel dataset at country and firm category level. The main finding establishes that the gains from integration into value chains are greater for small firms than for large firms. In particular, at the sample median, an increase of participation by 2.5% reduces the competitiveness gap between small and large firms by 1.25%. In addition, the analysis suggests that it is the use of foreign inputs that drives the result. In contrast, the domestic value in intermediate goods matters only in cases where value chains respond to domestic demand needs. The identification strategy relies on a fractional probit model allowing for unobserved effects, and a causal framework using the depth of trade agreements as instrument, in order to mitigate potential reverse causality.https://www.mdpi.com/2227-7099/9/1/12heterogeneous firmssmall firmscompetitivenessglobal value chainseconomic integrationtrade agreements |
| spellingShingle | Mauro Boffa Marion Jansen Olga Solleder Participating to Compete: Do Small Firms in Developing Countries Benefit from Global Value Chains? Economies heterogeneous firms small firms competitiveness global value chains economic integration trade agreements |
| title | Participating to Compete: Do Small Firms in Developing Countries Benefit from Global Value Chains? |
| title_full | Participating to Compete: Do Small Firms in Developing Countries Benefit from Global Value Chains? |
| title_fullStr | Participating to Compete: Do Small Firms in Developing Countries Benefit from Global Value Chains? |
| title_full_unstemmed | Participating to Compete: Do Small Firms in Developing Countries Benefit from Global Value Chains? |
| title_short | Participating to Compete: Do Small Firms in Developing Countries Benefit from Global Value Chains? |
| title_sort | participating to compete do small firms in developing countries benefit from global value chains |
| topic | heterogeneous firms small firms competitiveness global value chains economic integration trade agreements |
| url | https://www.mdpi.com/2227-7099/9/1/12 |
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