Discussion Papers

No.825 Who Dominates Global Value Chains? Multinationals vs Domestic Firms

by Yuning Gao, Bo Meng, Gabriele Suder, Jiabai Ye

December 2021


This paper aims to advance International Business (IB) research by better identifying the role and influential area of foreign-owned multinational enterprises (MNEs) in global value chains (GVCs) compared to that of domestic-owned firms. For doing this, we build an input-output model to divide the topology of trade in value added into three networks composed respectively by the traditional trade, simple and complex GVC trade according to whether and how production sharing happens across national borders. Using the new OECD inter-country input-output data for 2000-2016, we find that in different networks and for different sectors, domestic-owned firms and MNEs play very different roles in value added creation through GVCs. For example, China’s domestic-owned firms have been not only a supply center of manufacturing value added, but also rise as a new regional center of both supply and demand for services through simple GVC networks; the United States’ domestic-owned firms dominate GVCs in services as a global center for both demand and supply, especially in complex GVC networks; MNEs located in Germany and the United Kingdom show the dominate presence respectively in providing manufacturing and services value added via complex GVCs networks. Through making GVCs visible by trade in value added based network analyses, this paper helps better understanding of who dominates what types of GVC over time, thus enriches the IB research concerning the GVC governance.

Keywords: Global value chain; trade in value added; multinational enterprise; network analysis; input–output analysis; firm ownership

JEL classification: F6, F13, F15, D57

Please note that discussion papers are works in various stages of progress and most have not been edited and proofread and may contain errors of fact or judgment. Revised versions of these papers may subsequently appear in more formal publication series. The views expressed in this publication are those of the author(s). The IDE does not guarantee the accuracy of the data included and accepts no responsibility for any consequences arising from its use.