Global value chain, industrial agglomeration and firm productivity’s interactive effect

【Author】

SU Danni;SHENG Bin;SHAO Chaodui;CHEN Shuai

【Institution】

Research Center on Multinational Corporations, Nankai University;School of Economics, Nankai University;Research Center on Multinational Corporations, Nankai University;School of Economics, Nankai University;Research Center on Multinational Corporations, Nankai University;School of Economics, Nankai University;Hangzhou Central Sub-branch, People’s Bank of China

【Abstract】

Since the 1980s, the global value chain (GVC) characterized by the “global deconstruction of production” and “global integration of trade” has expanded rapidly. Since the reform and opening up, and especially since joining the WTO in 2001, China has become increasingly integrated into the GVC, and its position and role in the GVC have changed significantly. At the same time, the agglomeration of the domestic economy has rapidly increased, becoming an important symbol of China’s economic growth miracle. Obviously, in this interactive process of deepening domestic economic agglomeration and increasing participation in the GVC, China’s firms serve as part of the production system of domestic large-scale local industry clusters and of the production system of the intricately interwoven GVC. Thus, this raises the question of what kind of interactive relationship exists between the GVC and domestic local industrial clusters for firms, and what impact this interaction has on firms’ production performance. These questions highlight important theoretical and policy issues relating to the overall situation of the domestic and foreign markets and resources from the perspective of GVC. This paper is the first to combine the GVC-led international production system and the agglomeration of local industries under the domestic production system in a unified framework. This framework is used to construct an interactive mechanism of the GVC, industrial agglomeration, and firm productivity. This mechanism is then used to empirically analyze China’s manufacturing firms from 2000 to 2007 on the basis of a comprehensive firm GVC index that includes division position, upstream participation, and downstream participation. The results show that the higher the division position in the GVC, the higher the firm’s productivity will be. However, the implementation of strategic isolation by using “double barriers” to block the mutual flow of resources and the mutual imitation of ability weakens the positive spillover of agglomeration to firm productivity. With respect to the different ways of embedding in the GVC, the higher the rate of participation in the upstream GVC, the weaker the spatial correlation with the local industrial clusters will be, and the higher the rate of participation downstream, the stronger the spatial correlation with the local industrial clusters will be. Further penetrating into the three spatial spillover channels of agglomeration, we have found that the different ways of embedding in the GVC have heterogeneous productivity effects mainly through labor pool and knowledge spillover, yet input sharing does not play a role. This results in the binary segmentation structure of “upstream embedding–downstream embedding” interacting with the domestic production system from the view of GVC. The findings of this paper have strong policy implications for breaking the binary segmentation of China’s production system against the background of the GVC and improving the overall quality of the domestic and foreign markets and resources. The government should actively guide and strengthen the strategic investment in cultivating talent, build an effective platform for knowledge exchange and talent cooperation, and promote a spatial coordination pattern of strong with weak and strong-weak cohesion among firms, thus forming an endogenous GVC upgrade path of “single firm–whole industry–whole country.” This paper makes a number of contributions to the literature. First, after considering the details of factors such as indirect imports, return value added, and indirect value added exports using China’s customs data and World Input-Output Database, we attempt to construct and measure three indicators of firm participation in the GVC, namely the GVC division position, GVC upstream participation, and GVC downstream participation, to fully reveal the depth and breadth of firm participation in the GVC. Second, drawing on Brandt et al. (2012), this paper presents a more detailed and scientific processing of China’s industrial firm level data, and matches the data with China’s customs data to empirically test the interactive mechanism of the GVC, industrial agglomeration, and firm productivity. At last, based on Marshall’s externality theory, the paper further explores the driving forces behind the interactive relationships between firm participation in the GVC and local industrial clusters from the perspective of labor pool (“people”), input sharing (“objects”), and knowledge spillover (“ideas”).

【Keywords】

global value chain;industrial agglomeration;productivity interactive effect;binary segmentation of the production system

References

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Total: 21 articles

  • [1] WHANG Yi-min1,SONG Yan-wen2(1.Management School of Shandong University,Jinan 250100,China;2.Shandong Institute of Economics,Jinan 250014,China), Global Production Network Effect,Cluster Closure,and Paradox of Upgrading——An Analysis Based on Taiwanese Notebook Computer Cluster in Mainland China, China Industrial Economy,
  • [2] WEN Hu1, ZENG Gang2 (1. Economy and Commerce Academy of Hunan University, Changsha 410082, China; 2. Geography Department of East China Normal University, Shanghai 200062, China), study of Global Value Chain Governance and Local Industrial Network Upgrading——Case of Pudong Integrated Circuit Industrial Network, China Industrial Economy,
  • [3] LIU Yi,XIA Jie-chang(Institute of Finance and Trade Economics CASS,Beijing 100836,China), Insertion and Upgrade of Service Clusters under Global Value Chain——Case Study of Chinese Creative Clusters, China Industrial Economics,
  • [4] Zhang Jie;Chen Zhiyuan;Liu Yuanchun;Renmin University of China;, Measuring the Domestic Value Added in China's Exports and the Mechanism of Change, Economic Research Journal,

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