A firm-level analysis of global value chain participation effects

Abstract

This paper deals with global value chain (hereafter GVC) participation at firm level and analyses the impact of participation on firms’ TFP. It proposes a novel metric for GVC involvement at firm level, encompassing both backward and forward linkages, akin to the macro-level measure. The analysis delves into aspects not systematically explored in prior literature, including a firm’s linkage direction (forward or backward), extent of involvement (regional European or global) and organisational forms (vertical integration or outsourcing). Methodologically, it utilises the PSM-DID method—applying DDD where appropriate—and assess whether GVC participation fosters productivity (i.e. test for the learning effect) based on the population of Slovenian firms over the 2013–2022 period. Sensitivity analysis examines variations in thresholds for GVC participation and distinct pre- and post-treatment periods. GVC participation increases firm productivity, driven mainly by forward linkages and regional European involvement. Distinct organisational forms of GVC participating firms are found not to have systematically different effects on firm productivity.