Global value chains and technology transfer: new evidence from developing countries

Abstract

AbstractInternational trade has long been considered a channel of technology transfer. This paper draws from the World Bank’s Enterprise Surveys to provide a sample of 18 developing and emerging economies to investigate whether global value chains (GVCs) are a vehicle for the transfer of technology. It focuses on one specific channel for technology transfer, namely, the licensing of foreign technology. To control for the possible endogeneity of technology licensing, propensity score matching is combined with a difference-in-differences approach. The results show a positive effect of being involved in two-way trading on the licensing of foreign technology. Firms that become two-way traders are significantly more likely to use foreign-licensed technology than firms starting to export or import. This evidence suggests that the complexity associated with the mode of internationalisation determines the licensing of foreign technology. GVC participation also appears to foster firms’ performance, reflecting my findings that the acquisition of foreign technology leads to significant productivity improvements.