How do firms in Sub-Saharan Africa benefit from global value chains?

Abstract

Sub-Saharan Africa has increased its presence in GVCs but remains the least integrated area in the world. In this paper, we go a step further in the related literature and descend to firm-level data. Thus, we identify the determinants and effects of GVC participation of manufacturing firms in the region. We use indicators of the extensive and intensive margins of participation and of backward and forward integration. We find that good infrastructure, quality of institutions and security to prevent crime are conducive to participation. In contrast, lack of access to finance, the existence of an informal sector or high trade costs discourage participation. Finally, participation in GVCs has positive effects on firm performance variables (innovation, productivity, wages and employment).