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On GVC and Innovation: What Is at Stake?

Author

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  • Yasmine Eissa

    (Cairo University)

  • Chahir Zaki

    (Cairo University)

Abstract

This paper empirically investigates the impact of global value chains (GVC) participation on countries’ innovation performance. Highlighting the learning effect of foreign knowledge embedded in imported intermediate goods counters the argument that GVC participation is biased towards developed countries with skilled labor abundance. We construct a GVC knowledge spilloversindex by merging data on GVC from the EORA26 dataset with R&D of the trade partner. Results show a positive and significant effect of the GVC knowledge spillovers index on innovation measured by resident patent per capita. Likewise, we show that the quality of institutions, intellectual property agreements, competition policy and trade policy constitute a pile of interfering preconditions in the nexus between GVC participation and innovation. Our results remain robust when we use an instrumental variable approach to control for the endogeneity between GVC and innovation and when we use alternative measure for our two variables of interest

Suggested Citation

  • Yasmine Eissa & Chahir Zaki, 2022. "On GVC and Innovation: What Is at Stake?," Working Papers 1589, Economic Research Forum, revised 20 Sep 2022.
    • Handle: RePEc:erg:wpaper:1589
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