Global Value Chains and Upgrading: What, When and How?

Padmashree Gehl Sampath & Bertha Vallejo

#2018-016

This paper focuses on explaining how technological capabilities interact with trade and GVCs participation to foster upgrading. We analyse trade performance of 74 developing countries in 2000 and 2010 from a perspective of learning, to understand what variables account for technological diversification over time when countries trade, including through GVCs. We find that technological capabilities not only condition the initial determination of local firms in trade and GVCs, but they also determine the extent to which local firms in developing countries manage to leverage knowledge flows and move into activities of greater technological complexity from a dynamic perspective. Our results point to the critical role of national learning variables in countries' performance over time. While emerging economies have synergistic relationships between variables that explain technological capabilities and their trade and GVC performance, this is not the case for developing countries as whole in our sample.

Keywords: Trade, global value chains (GVCs), technological capabilities, learning, developing countries, least developed countries (LDCs), structural change, diversification, policy.

JEL Classification: F14, L14, L16, L23, O14, O19, O25, O31, O33, O43