Global Value Chain Project

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    Global Value Chain Participation and Innovation: Firm-Level Evidence from Africa
    (2022-08) Avenyo, Elvis K.; Mensah, Emmanuel B.; Ndubuisi, Gideon; Sakyi, Daniel
    Firm-level innovation in developing countries is mostly incremental and depends on non-R&D activities. Integration into global production networks is one such activity that could help firms in developing countries to innovate. This is particularly the case since new technologies and foreign knowledge diffuse through inter-firm linkages. This paper examines the relationship between Global Value Chain (GVC) participation and firm innovative capabilities in Africa, utilizing data from the World Bank’s Enterprise Survey (WBES). Addressing endogeneity arising from reverse causality, our results show that firms in Africa that engage in GVC activities have a higher likelihood of introducing innovative products onto markets. The results are robust to alternative definition of GVC and innovation variables and identification strategy. Our findings shed light on the mechanisms that make innovation possible within GVC firms, and the implications it has for trade, regional integration, and innovation in Africa.
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    A Macro and Micro Analysis of Value Chain Trade in Africa
    (African Economic Research Consortium, 2022-07) Montfaucon, Angella Faith; Nigatu, Natnael Simachew; Majune, Socrates
    Africa's participation in global value chains (GVCs) is not well documented compared to the developed world. Clearly understanding GVC participation levels is critical to enable evidence-based policy. This paper assesses Africa's GVC participation from both macro and micro perspectives using three sources of data, and empirically estimating determinants of GVC participation across the data. The analysis relies on databases based on global input-output tables, customs-level data, and survey data from which measures of GVCs are constructed. We find that aggregate GVC data masks disparities, as Africa's proportion of firms that participate in GVCs is comparable to other regions, but the level of Africa's GVC trade is much lower. A common theme in the multi country empirical results across two sets of data is the positive relationship between political stability and backward GVC participation of African countries. Comparatively, improvement in political stability and proximity to major regional hubs are more relevant for Africa than other regions. For single country analyses, the consistent result is that FDI is positively associated with backward GVC participation, both at the firm-level and country-level of analysis. This highlights how much institutions and the need to attract FDI are relevant in promoting Africa's future engagements in global values chains. The inconsistencies in the data, however, suggest the need to consider establishing protocols and database that help understand Africa's GVC participation more coherently to enable policy makers to make informed decisions.
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    Surges in Participation in Global Value Chains: Drivers and Macroeconomic Impacts in Sub-Saharan Africa
    (African Economic Research Consortium, 2022-07) Ebeke, Christian
    This paper proposes a cross-country examination of the drivers and impacts of episodes of surges in countries' participation in international value chains based on event-analysis previously used in the empirical literature in studies on export surges or GDP growth accelerations. Using a large sample of developing countries over the period 1990‒2018, and relying on the EORA database, the paper offers three main results. First, the “surges” are not common, with only 11 episodes recorded in sub Saharan Africa over the past three decades. Second, strong FDI inflows and governance quality precede the occurrence of these “surges”, while protracted real exchange rate under-valuations appear to nurture these surges. Third, once they occur, these “surges” are transformative: they are associated with higher real per capita GDP growth, rapid industrialization, stronger diversification and sophistication of exports, and faster poverty reduction.
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    African Firms in Global Value Chains: What Can We Learn from Firm-Level Data in Cameroon and Côte d'Ivoire?
    (African Economic Research Consortium, 2022-07) Coulibaly, Romaric; Moreno, Heddie; Akiko, Suwa-Eisenmann; Traore, Nouhoum
    This scoping paper exploits information from a unique data set constructed by merging firm census and custom data sets from Cameroon and Côte d'Ivoire to analyse the characteristics of firms that participate in global value chains (GVCs) in sub-Saharan Africa. These “GVC firms” are defined as firms that both export and import, with positive production and labour. The paper provides a detailed review of the state of firms' participation in GVCs in Africa and its consequences on trade, employment, and growth. The evidence in Cameroon and Côte d'Ivoire suggests that, in line with literature on firm heterogeneity and trade, firms engaged in GVCs are larger, more productive, and live longer than one-way-traders or domestic firms. Surprisingly, however, there are more GVC firms than pure exporters, a sign of the challenges faced by firms in those countries if they want to sell abroad. The probability of moving into a GVC is higher for exporters than for importers, showing that exporting is a stepping stone for firms to join a GVC.
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    Services Trade in Africa: Structure and Growth
    (2022-07) Ariu, Andrea; Ogliari, Laura
    This paper shows that trade in services is still at its infancy in Africa; its growth started later than for other developed and developing economies and, so far, it involves mostly low-skilled services. Disentangling the different sources of trade growth, we find that demand and supply determinants have been relatively stable during the period 2002‒2016, while service diversification and trade policy are the main propellants. In particular, trade in goods liberalization increased service trade as well due to the complementarities between the two. In terms of geographical and industrial involvement, services produced in Africa are able to reach farther destinations than goods, but they are concentrated on industries close to final demand, thus missing high-skilled services which are more upstream, but represent higher value-added inputs. Therefore, there is still plenty of scope to consider trade in services as a potential source of growth and development for African countries.