Abstract:
Does digitalization by firms spur participation in Global Value Chains (GVCs)? Rapid strides in informa- tion and communication technology (ICT) through cost-effective and reliable telecommunications have facilitated multinational firms to outsource complex production activities across borders over the years. While the rise of GVCs to prominence has coincided with the ICT revolution, there is very little sys- tematic empirical evidence at the firm-level documenting the nexus between digitalization of firms and their participation in GVCs. By using rich firm-level data for a sample of 24,839 firms across 52 countries spanning the period 2006–2018, we empirically test the importance of digitalization in deepening GVC participation. After correcting for potential biases arising from self-selection and reverse causality, our empirical analysis shows that digitalization by firms positively influences GVC deepening. Our results are quite robust to various measures of GVCs and digitalization. Further, we also document how digitalization boosts GVC integration of firms that are financially constrained.
Authors:
Sasidaran Gopalan (Assistant Professor in the Department of Innovation in Government and Society, College of Business and Economics at United Arab Emirates University (UAEU), Abu Dhabi, United Arab Emirates).
Ketan Reddy (Post-Doctoral Research Associate at King’s India Institute, King’s College London, UK).
Subash Sasidharan (Associate Professor of Economics at the Department of Humanities and Social Sciences, Indian Institute of Technology Madras (IITM), India).
Read the full article here: Does digitization spur global value chain participation? Firm-level evidence from emerging markets