Volume 29 Number 1, 2024

Drivers of Participation in Global Value Chains: International Evidence on What Matters

Lilianne Isabel Pavón-Cuéllar ^a, Andrea Barreto-Pavón ^b
a Faculty of Business and Economics, Anáhuac University Mexico
lpavon@anahuac.mx; lipavon@gmail.com
^b Google, Mountain View, CA, United States
anbapa@google.com; anbapa0101@gmail.com

ABSTRACT

Globalization and technological progress induce an unprecedented commercial interdependence between countries: world trade and production are increasingly structured around Global Value Chains (GVCs). These GVCs create an international production fragmentation, allowing higher efficiency and competitiveness, and exposure to global shocks, so trade policies must more proactively consider this new reality of business. This paper analyzes the plausible determinants of insertion in global production, in terms of forward and backward participation in GVCs. It is verified by using static panels, that FDI flows, education, and economic activity affect both types of linkages, although in different ways. It is also confirmed that the distance to the largest hub and the exchange rate are important in backward participation, while the size of the economy and the quality of logistics determine the forward one. Based on this diagnosis, this work guides academicians, practitioners, and policymakers to promote successful insertion in GVCs. 

JEL Classification: F23, O30

Keywords: global value chains, forward and backward participation, value-added 

Cite this article: 

Pavón-Cuéllar, L.I., Barreto-Pavón, A., 2024, Drivers of Participation in Global Value Chains: International Evidence on What Matters, International Journal of Business, 29(1), 004. https://doi.org/10.55802/IJB.029(1).004