Subash Sasidharan

We analyze the role of digital infrastructure in shaping the global value chain (GVC) participation of Indian manufacturing firms. To examine the digitalization and GVC nexus, a rich, firm-level, unbalanced panel of 4875 manufacturing firms from the past two decades is used to detail the rising significance of digital infrastructure in the Indian context and then to examine empirically the relationship between digitalization and GVCs. Employing a logit model, we observe a positive and significant association of digitalization on firms’ GVC participation. Further, subsample results highlight that digitalization promotes the integration of small firms and firms from low-technology industries into the GVC. Moreover, the findings of our analysis are robust to alternate measures of GVCs.

This paper explores the relationship between financial constraints and firm participation in global value chains (GVC). We use a rich firm-level data belonging to the Indian manufacturing sector for the period 2001–2016. Controlling for endogeneity and sample selection bias, our empirical outcome reveals a negative impact of financial constraint on firm GVC participation. We also find that inter-firm trade credit fosters firm participation in GVCs. Our findings also highlight that firms dependent on external finance find it challenging to participate in GVCs. Further, sub-sample analysis shows a significant effect of financial constraints in the case of small firms. Finally, we find that firms that are relatively more financially constrained are more likely to become a part of GVC (GVC starters) during the study period. Our findings have strong policy implication on the lines of promoting GVC participation for Indian manufacturing firms and hence remains of interest for policymakers.

Does digitalization by firms spur participation in Global Value Chains (GVCs)? Rapid strides in information 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 systematic 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.

The objective of this paper is to examine the relationship between innovation and firms’ participation in global value chains (GVCs). To achieve this objective, we use rich firm-level data from the World Bank Enterprise Survey (WBES), spanning the period of 2006–2017, belonging to 90 countries. Accounting for endogeneity arising from reverse causality, our study finds firm innovation to be a driver of firm GVC participation across countries. These findings are robust to alternative measures of innovation and various sub-sample analysis.