Innovation, Productivity and the integration into Global Value Chain: Firm- level Evidence from China

This paper examines the effects of integration into global value chain on innovation and productivity with a firm-level panel dataset from China. Our results show that firms focusing on international collaboration in technology have a higher patenting activity than those focusing on national collaboration in technology. The innovation-enhancing effect of international collaboration in technology is higher for domestic firms having higher innovation capacity, having no prior experience in working with foreign customer and supplier, producing services, and pursuing high-quality patent. We also show firms with main supplier and customer abroad are more productive than those with main supplier and customer in China. The productivity-enhancing effect of having main supplier abroad is larger than that of having main customer abroad, and the productivity-enhancing effect of having main customer abroad applies to service firms only. Further, we find that international collaboration in technology indirectly foster productivity through a higher patenting activity. Consistent with the literature, we show that patenting activity and productivity associate with firm characteristics, industry characteristics and year fixed effects.