Does global value chain engagement improve export quality? Evidence from Chinese manufacturing firms

Abstract

Using a firm-level data set of Chinese manufacturing sector, we examine whether global value chain (G.V.C.) engagement induces firms to upgrade the quality of the goods that they export. Empirical results show that G.V.C. participation has positive impact on export product quality, and this finding is consistent across several robustness checks. However, the influence of G.V.C. embedment on export quality presents an ‘inverted-U’ shape. The mechanism analysis demonstrates that the effect of G.V.C. participation on export quality is driven by competition effect and firms’ willingness to import high-quality intermediates. Furthermore, the quality effect of G.V.C. embedment differs depending on firm characteristics. This article therefore contributes to a better understanding of the benefits of participation in G.V.C.s for manufacturing firms from developing countries.