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Productivity, financial constraints, and firms' global value chain participation: Evidence from China

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  • Lu, Yue
  • Shi, Huimin
  • Luo, Wei
  • Liu, Bin

Abstract

We calculate the foreign value-added ratio (FVAR) to measure the global value chain (GVC) participation of Chinese exporting firms from 2000 to 2006. Motivated by the heterogeneous firm model of trade, we empirically explore the effects of firm productivity and financial constraints on firms' GVC participation. We find that (1) productivity increases and financial constraints reduce FVAR; (2) productivity affects FVAR for both first-time and continuous exporters, while financial constraints only significantly affect first-time exporters; and (3) financial constraints dampen the positive effect of productivity on FVAR. Our findings thus suggest that productivity and financial constraints play important roles in determining firms' GVC participation.

Suggested Citation

  • Lu, Yue & Shi, Huimin & Luo, Wei & Liu, Bin, 2018. "Productivity, financial constraints, and firms' global value chain participation: Evidence from China," Economic Modelling, Elsevier, vol. 73(C), pages 184-194.
    • Handle: RePEc:eee:ecmode:v:73:y:2018:i:c:p:184-194
    DOI: 10.1016/j.econmod.2018.03.015
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    More about this item

    Keywords

    Global value chain; Productivity; Financial constraints;
    All these keywords.

    JEL classification:

    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F15 - International Economics - - Trade - - - Economic Integration
    • L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance
    • G31 - Financial Economics - - Corporate Finance and Governance - - - Capital Budgeting; Fixed Investment and Inventory Studies

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