Hubs of embodied business services in a GVC world

Abstract

This paper explores the phenomenon of functional upgrading in Global Value Chains (GVCs) by applying empirical techniques of Social Network Analysis and graph theory to data from the TiVA database for the period from 1995 to 2018. Specifically, we focus on two (from less to more complex) stages of GVC participation: the global supply of manufacturing inputs and the global supply of business services to be embodied in other countries’ exports. We identify which countries are the leading specialized global providers in each stage, analysing their evolutions over time and the relationship between both progressions. It highlights the trajectory of China that has increased its role as a hub in both stages to reach top positions. Using a dynamic panel data model, we find that the role of a country as a specialized global supplier of manufacturing inputs is associate with becoming a prominent global supplier of embodied business services, suggesting a path to functional upgrading in GVCs.