IDEAS home Printed from https://ideas.repec.org/a/eee/riibaf/v77y2025ipas0275531925001333.html
   My bibliography  Save this article

Domestic value chain, digital finance and the quality of firm's export products

Author

Listed:
  • Xiaoli, Ma
  • Benye, Shi
  • Hongliang, Lu
  • Raza, Ali

Abstract

Chinese firms have strategically positioned themselves within the global value chain by leveraging low-cost labor to achieve substantial growth in exports and economic development. This study presents a theoretical model that offers valuable insights into how embedding in domestic value chains influences the quality of firms' export products. Based on this framework, the paper empirically examines the impact of domestic value chain embedding on export product quality at the micro-firm level. The findings indicate that domestic value chain embedding has a significant positive effect on export product quality. Further analysis reveals that this impact operates through mechanisms through increased efficiency in fixed asset investment and productivity. Heterogeneity tests show that the effects of domestic value chain embedding are more pronounced in eastern regions, labor-intensive industries, firms with fewer financial constraints, and firms with lower initial product quality. Moreover, the results highlight that global and domestic value chains are complementary, rather than substitutive, in promoting export product quality. Finally, the study finds that digital finance positively moderates the relationship between domestic value chain embedding and export product quality.

Suggested Citation

  • Xiaoli, Ma & Benye, Shi & Hongliang, Lu & Raza, Ali, 2025. "Domestic value chain, digital finance and the quality of firm's export products," Research in International Business and Finance, Elsevier, vol. 77(PA).
  • Handle: RePEc:eee:riibaf:v:77:y:2025:i:pa:s0275531925001333
    DOI: 10.1016/j.ribaf.2025.102877
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0275531925001333
    Download Restriction: Full text for ScienceDirect subscribers only

    File URL: https://libkey.io/10.1016/j.ribaf.2025.102877?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to

    for a different version of it.

    References listed on IDEAS

    as
    1. Bo Meng & Norihoko Yamano, 2017. "Compilation of a regionally extended inter-country input–output table and its application to global value chain analyses," Journal of Economic Structures, Springer;Pan-Pacific Association of Input-Output Studies (PAPAIOS), vol. 6(1), pages 1-38, December.
    2. Eric A. Verhoogen, 2008. "Trade, Quality Upgrading, and Wage Inequality in the Mexican Manufacturing Sector," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 123(2), pages 489-530.
    3. repec:clu:wpaper:0708-12 is not listed on IDEAS
    4. Kalina Manova & Zhiwei Zhang, 2012. "Export Prices Across Firms and Destinations," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 127(1), pages 379-436.
    5. Liu, Qing & Qiu, Larry D., 2016. "Intermediate input imports and innovations: Evidence from Chinese firms' patent filings," Journal of International Economics, Elsevier, vol. 103(C), pages 166-183.
    6. Haichao Fan & Yao Amber Li & Stephen R. Yeaple, 2015. "Trade Liberalization, Quality, and Export Prices," The Review of Economics and Statistics, MIT Press, vol. 97(5), pages 1033-1051, December.
    7. Maria Bas & Vanessa Strauss-Kahn, 2013. "Input-Trade Liberalization, Export Prices and Quality Upgrading," Working Papers hal-03460775, HAL.
    8. Amit K. Khandelwal & Peter K. Schott & Shang-Jin Wei, 2013. "Trade Liberalization and Embedded Institutional Reform: Evidence from Chinese Exporters," American Economic Review, American Economic Association, vol. 103(6), pages 2169-2195, October.
    9. Maurice Kugler & Eric Verhoogen, 2012. "Prices, Plant Size, and Product Quality," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 79(1), pages 307-339.
    10. Bekkers, Eddy & Koopman, Robert B. & Rêgo, Carolina Lemos, 2021. "Structural change in the Chinese economy and changing trade relations with the world," China Economic Review, Elsevier, vol. 65(C).
    11. Matteo Bugamelli & Luigi Infante, 2003. "Sunk Costs of Exports," Temi di discussione (Economic working papers) 469, Bank of Italy, Economic Research and International Relations Area.
    12. Ivarsson, Inge & Alvstam, Claes Göran, 2010. "Supplier Upgrading in the Home-furnishing Value Chain: An Empirical Study of IKEA's Sourcing in China and South East Asia," World Development, Elsevier, vol. 38(11), pages 1575-1587, November.
    13. Mary Amiti & Shang‐Jin Wei, 2009. "Service Offshoring and Productivity: Evidence from the US," The World Economy, Wiley Blackwell, vol. 32(2), pages 203-220, February.
    14. Antoine Gervais, 2015. "Product quality and firm heterogeneity in international trade," Canadian Journal of Economics, Canadian Economics Association, vol. 48(3), pages 1152-1174, August.
    15. Bastos, Paulo & Silva, Joana, 2010. "The quality of a firm's exports: Where you export to matters," Journal of International Economics, Elsevier, vol. 82(2), pages 99-111, November.
    16. Antoine Gervais, 2015. "Product quality, firm heterogeneity and trade liberalization," The Journal of International Trade & Economic Development, Taylor & Francis Journals, vol. 24(4), pages 523-541, June.
    17. Johnson, Robert C., 2012. "Trade and prices with heterogeneous firms," Journal of International Economics, Elsevier, vol. 86(1), pages 43-56.
    18. Juan Carlos Hallak & Jagadeesh Sivadasan, 2009. "Firms' Exporting Behavior under Quality Constraints," Working Papers 09-13, Center for Economic Studies, U.S. Census Bureau.
    19. Juan Carlos Hallak & Peter K. Schott, 2011. "Estimating Cross-Country Differences in Product Quality," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 126(1), pages 417-474.
    20. Mary Amiti & Amit K. Khandelwal, 2013. "Import Competition and Quality Upgrading," The Review of Economics and Statistics, MIT Press, vol. 95(2), pages 476-490, May.
    21. Marc J. Melitz, 2003. "The Impact of Trade on Intra-Industry Reallocations and Aggregate Industry Productivity," Econometrica, Econometric Society, vol. 71(6), pages 1695-1725, November.
    22. James Heckman, 2013. "Sample selection bias as a specification error," Applied Econometrics, Russian Presidential Academy of National Economy and Public Administration (RANEPA), vol. 31(3), pages 129-137.
    23. Hummels, David & Ishii, Jun & Yi, Kei-Mu, 2001. "The nature and growth of vertical specialization in world trade," Journal of International Economics, Elsevier, vol. 54(1), pages 75-96, June.
    24. Upward, Richard & Wang, Zheng & Zheng, Jinghai, 2013. "Weighing China’s export basket: The domestic content and technology intensity of Chinese exports," Journal of Comparative Economics, Elsevier, vol. 41(2), pages 527-543.
    25. Bas, Maria & Strauss-Kahn, Vanessa, 2015. "Input-trade liberalization, export prices and quality upgrading," Journal of International Economics, Elsevier, vol. 95(2), pages 250-262.
    26. Ernst, Dieter & Kim, Linsu, 2002. "Global production networks, knowledge diffusion, and local capability formation," Research Policy, Elsevier, vol. 31(8-9), pages 1417-1429, December.
    27. Shaked, Avner & Sutton, John, 1983. "Natural Oligopolies," Econometrica, Econometric Society, vol. 51(5), pages 1469-1483, September.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Adriana Peluffo & Juan Ignacio Scasso, 2016. "Destination and source countries: Do they have a role on product quality?," Documentos de Trabajo (working papers) 16-10, Instituto de Economía - IECON.
    2. Peluffo Adriana & Scasso Juan, 2023. "The Role of Trade Partners on Product Quality: The case of Uruguay," Asociación Argentina de Economía Política: Working Papers 4681, Asociación Argentina de Economía Política.
    3. Chen, Natalie & Juvenal, Luciana, 2016. "Quality, trade, and exchange rate pass-through," Journal of International Economics, Elsevier, vol. 100(C), pages 61-80.
    4. Manova, Kalina & Yu, Zhihong, 2017. "Multi-product firms and product quality," Journal of International Economics, Elsevier, vol. 109(C), pages 116-137.
    5. Piveteau, Paul & Smagghue, Gabriel, 2019. "Estimating firm product quality using trade data," Journal of International Economics, Elsevier, vol. 118(C), pages 217-232.
    6. Crinò, Rosario & Ogliari, Laura, 2015. "Financial Frictions, Product Quality, and International Trade," CEPR Discussion Papers 10555, C.E.P.R. Discussion Papers.
    7. Maria Bas & Vanessa Strauss-Kahn, 2024. "Lower prices or higher quality? Firms’ response to increased competition following trade liberalization," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 160(2), pages 279-309, May.
    8. Bas, Maria & Strauss-Kahn, Vanessa, 2015. "Input-trade liberalization, export prices and quality upgrading," Journal of International Economics, Elsevier, vol. 95(2), pages 250-262.
    9. Bas, Maria & Paunov, Caroline, 2021. "Input quality and skills are complementary and increase output quality: Causal evidence from Ecuador’s trade liberalization," Journal of Development Economics, Elsevier, vol. 151(C).
    10. Flach, Lisandra & Unger, Florian, 2022. "Quality and gravity in international trade," Journal of International Economics, Elsevier, vol. 137(C).
    11. Feng, Ling & Li, Zhiyuan & Swenson, Deborah L., 2016. "The connection between imported intermediate inputs and exports: Evidence from Chinese firms," Journal of International Economics, Elsevier, vol. 101(C), pages 86-101.
    12. DeStefano, Timothy & Timmis, Jonathan, 2024. "Robots and export quality," Journal of Development Economics, Elsevier, vol. 168(C).
    13. Sheng, Liugang & Song, Huasheng & Zheng, Xueqian, 2025. "How did Chinese exporters manage the trade war?," Journal of International Money and Finance, Elsevier, vol. 153(C).
    14. Sofia Anyfantaki & Sarantis Kalyvitis & Margarita Katsimi & Eirini Thomaidou, 2018. "Export pricing at the firm level with panel data," Working Papers 241, Bank of Greece.
    15. Fan, Haichao & Li, Yao Amber & Yeaple, Stephen R., 2018. "On the relationship between quality and productivity: Evidence from China's accession to the WTO," Journal of International Economics, Elsevier, vol. 110(C), pages 28-49.
    16. Shang, Di & Diao, Gang & Zhao, Xiaodi, 2020. "Have China's regulations on imported waste paper improved its quality," Forest Policy and Economics, Elsevier, vol. 119(C).
    17. Copestake, Alexander & Zhang, Wenzhang, 2023. "Inputs, networks and quality-upgrading: Evidence from China in India," China Economic Review, Elsevier, vol. 77(C).
    18. Maria Bas & Caroline Paunov, 2019. "What gains and distributional implications result from trade liberalization," Documents de travail du Centre d'Economie de la Sorbonne 19003, Université Panthéon-Sorbonne (Paris 1), Centre d'Economie de la Sorbonne.
    19. Crinò, Rosario & Ogliari, Laura, 2017. "Financial imperfections, product quality, and international trade," Journal of International Economics, Elsevier, vol. 104(C), pages 63-84.
    20. Antoniades, Alexis, 2015. "Heterogeneous Firms, Quality, and Trade," Journal of International Economics, Elsevier, vol. 95(2), pages 263-273.

    More about this item

    Keywords

    ;
    ;
    ;
    ;

    JEL classification:

    • F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:riibaf:v:77:y:2025:i:pa:s0275531925001333. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/ribaf .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.