Digitalization and global value chain participation: firm-level evidence from Indian manufacturing

Abstract

We analyze the role of digital infrastructure in shaping the global value chain (GVC) participation of Indian manufacturing firms. To examine the digitalization and GVC nexus, a rich, firm-level, unbalanced panel of 4875 manufacturing firms from the past two decades is used to detail the rising significance of digital infrastructure in the Indian context and then to examine empirically the relationship between digitalization and GVCs. Employing a logit model, we observe a positive and significant association of digitalization on firms’ GVC participation. Further, subsample results highlight that digitalization promotes the integration of small firms and firms from low-technology industries into the GVC. Moreover, the findings of our analysis are robust to alternate measures of GVCs.

Value Chain Digitalization, Global Value Chain Embeddedness, and Distributed Innovation in Value Chains

“…An alternative stream of literature focuses on developing new theoretical frameworks for digital innovation and entrepreneurial management in the digital age [33,54,55]. Another strand examines the role of digital technology in GVC embeddedness, positing that digital technology application can alter firm participation, labor division, and locations in GVCs [30,[56][57][58][59][60].…”

“…Choksy et al [29] emphasizes the necessity of building more resilient and robust value chain infrastructure. The transformation of an existing value chain system requires improving exchange facilitation, where digitalization plays a crucial role in both integrating and upgrading the supply chain [30]. In addition, value chain digitalization could be environmentally sustainable for business growth by saving time and resources [31].…”

Digital Transformation for Inclusive and Sustainable Development in Asia

“…By providing online services and information, digital platforms can also help firms overcome non-tariff barriers such as customs procedures, standards, and regulations. For example, the Asia-Pacific Trade Facilitation Forum is a regional initiative that aims to enhance trade facilitation through digital solutions (Reddy and Sasidharan 2023). Digital technologies can improve the efficiency and quality of production processes and enable firms to create new products and services that meet the demands of global markets, hence increasing GVC participation.…”