Multinational and Domestic Firms' Participation in Food Global Value Chains: Does Institutional Quality Matter?

Abstract

This study provides empirical evidence on the role of institutional quality in driving countries' participation in Global Value Chains (GVC) by distinguishing domestic from multinational firms (MNEs). Drawing on the Analytical Activities of MNEs (AMNE) database of OECD, we use a panel gravity framework to assess whether institutional quality improves GVC firms' participation in the food, beverages, and tobacco industry and whether the responsiveness to changes in institutional quality differs between domestic and multinational firms. A key finding is that the lower the institutional quality the greater the gap in participation between multinational and domestic firms. In developing countries, where institutions are relatively weak, domestic firms' GVC participation is correspondingly low relative to that of multinational firms.