Sustainable Production Clauses and Positioning in the Global Value Chain: An Analysis of International Investment Agreements (IIA) of the ICT Industry in Developing and Developed Markets

Abstract

Positioning in the global value chain (GVC) reflects the level and kinds of value creation of a firm or industry. The value creation can be on the upstream or downstream of the value chain. This study explores the effects of sustainable production clauses on the economic and physical positioning of information and communication technology (ICT) firms in the global value chain (GVC). We examined 2107 international investment agreements (IIA), signed by 54 countries that represent 70% of the global investment agreements. The empirical results show that the sustainable production intensity clauses in the IIAs have a significant impact on the positioning of ICT’s in the GVC. However, the degree of impact on the economic scale of participation and physical location in the GVC differs. The heterogeneity test shows that the sustainable production intensity clauses of IIAs between developed and developing countries affect positively and significantly the physical and economic locations in the GVCs. This is less significant while the IIAs are signed between the developed markets. These findings demonstrate that countries should consider sustainable production principles and responsible business conducts while signing the IIAs, and ensure their implementation while participating in the GVCs. This process can enhance value creation by moving towards higher value creation activities within the GVC.