Is productive service intermediate input a good instrument for enhancing the Global Value Chain participation?

Globalization has closely interconnected the production systems of various countries, and gaining a superiority in the Global Value Chain (GVC) has become a strategic imperative for many countries. Warrant attention, the service-based economy has been playing a pivotal role in optimizing and upgrading the GVC. Consequently, based on a sample that consists of 77 countries from 1995 to 2020, this article investigates the promoting effect of productive service intermediate input (PSII) on GVC participation. The findings are consistent with our expectations and are supported by a series of robustness checks and endogeneity handling. Heterogeneity analyses provide partial support for a geographic pattern linking PSII to GVC participation. Mediation analyses confirm that PSII enhances GVC participation through manufacturing servitization, financing constraint alleviation, and efficiency improvements. Finally, moderation analysis indicates that PSII exhibits a “substitution” effect vis-à-vis innovation capacity, implying a more feasible pathway for less developed countries to industrial upgrading.