Centres Of Excellence

To focus on new and emerging areas of research and education, Centres of Excellence have been established within the Institute. These ‘virtual' centres draw on resources from its stakeholders, and interact with them to enhance core competencies

Read More >>

Faculty

Faculty members at IIMB generate knowledge through cutting-edge research in all functional areas of management that would benefit public and private sector companies, and government and society in general.

Read More >>

IIMB Management Review

Journal of Indian Institute of Management Bangalore

IIM Bangalore offers Degree-Granting Programmes, a Diploma Programme, Certificate Programmes and Executive Education Programmes and specialised courses in areas such as entrepreneurship and public policy.

Read More >>

About IIMB

The Indian Institute of Management Bangalore (IIMB) believes in building leaders through holistic, transformative and innovative education

Read More >>

Global Value Chain Participation and Intermediate Export Sophistication

Neha Vinod Betai and Rupa Chanda
2020
Working Paper No
629
Body

The reorganization of the production process in the past two to three decades has led to the emergence of Global Value Chains (GVCs) where the production chain is spread across different geographies. This has in turn led to increased foreign value-added content in each country’s exports as well as increased trade in intermediate goods. Given the rise of GVCs as a key form of international trade and production, several studies in recent years have tried to analyse the benefits from GVC participation. In this paper, we focus on the impact of GVC participation on the sophistication of intermediate exports, i.e., the main channel through which countries participate in GVCs. Our analysis confirms the fact that GVC participation, both backward and forward, contributes positively to the sophistication of intermediate manufactured exports. However, the significance of the two channels varies depending on the income and human capital levels of a country. We find that backward participation has a positive, significant impact only for the high-income countries whereas forward participation is positive and significant for high-income as well as the low- and middle-income countries. Similarly, human capital and FDI, are significant only for the high-income economies, whereas distance from the technological frontier is an important factor determining sophistication for all sets of countries. Our analysis suggests that for countries to derive benefits from GVCs, there needs to be investment in innovation and human capital along with creating a conducive business environment and maintaining liberal trade and investment policies.

Key words
Global Value Chains (GVCs), Export Sophistication, Intermediate Goods, Forward Participation, Backward Participation
WP No. 629.pdf (3.64 MB)

Global Value Chain Participation and Intermediate Export Sophistication

Author(s) Name: Neha Vinod Betai and Rupa Chanda, 2020
Working Paper No : 629
Abstract :

The reorganization of the production process in the past two to three decades has led to the emergence of Global Value Chains (GVCs) where the production chain is spread across different geographies. This has in turn led to increased foreign value-added content in each country’s exports as well as increased trade in intermediate goods. Given the rise of GVCs as a key form of international trade and production, several studies in recent years have tried to analyse the benefits from GVC participation. In this paper, we focus on the impact of GVC participation on the sophistication of intermediate exports, i.e., the main channel through which countries participate in GVCs. Our analysis confirms the fact that GVC participation, both backward and forward, contributes positively to the sophistication of intermediate manufactured exports. However, the significance of the two channels varies depending on the income and human capital levels of a country. We find that backward participation has a positive, significant impact only for the high-income countries whereas forward participation is positive and significant for high-income as well as the low- and middle-income countries. Similarly, human capital and FDI, are significant only for the high-income economies, whereas distance from the technological frontier is an important factor determining sophistication for all sets of countries. Our analysis suggests that for countries to derive benefits from GVCs, there needs to be investment in innovation and human capital along with creating a conducive business environment and maintaining liberal trade and investment policies.

Keywords : Global Value Chains (GVCs), Export Sophistication, Intermediate Goods, Forward Participation, Backward Participation
WP No. 629.pdf (3.64 MB)