International Linkages, Gvc Operation and Performance: A European Firm-LEVEL Analysis

According to the participation index developed by Koopman et al. (2011), between 2000 and 2008, a vast majority of European countries sensibly increased their participation to the process of international production dispersion. The great recession of 2008 stopped only temporarily global integration, that rebound after 2011 (Di Mauro et al., 2011). However, going to firm level analysis, there is very scant evidence (Accetturo et al.2012; Agostino et al., 2014; Altomonte et al, 2012; Békés et al., 2011) on this phenomenon, mainly because of the lack of micro-data bases linking trade statistics and business registers.

In order to partially fill this gap, this paper studies the determinants of European industrial firms’ productivity, with a focus on firms’ organization and internationalization. In particular, the paper empirically analyses: i) the impact of firms’ position in value chains, and ii) within value chain operations, investigates the role of international linkages, i.e. exports and international sourcing. The analysis is conducted on a rich and novel dataset, originating from the EFIGE project, supported by the Research Directorate General of the European Commission. The representative sample includes around 15,000 firms for seven European countries: France, Germany, Italy, Spain, UK, Austria and Hungary.

The results of our econometric investigation suggest that:

1)  as pointed out by the GVC approach (Gereffi and Sturgeon, 2009) firms’ position in the value chain does matter: in terms of labour productivity, final and/or more downstream firms show an overall better performance than intermediate firms. Even though both types of firms were severely affected by the crisis, intermediate firms were more vulnerable because of an “inventory effect” (Alessandria et al., 2011). As a consequence of the reduction in final demand, final firms decreased orders across global value chains;

2)  in general terms, international firms’ linkages (exports and imports) exert a positive impact on firms’ performance, through different channels. While exports are likely to activate a process of “learning by exporting”; imports positively impact on firm’s productivity because they allow: cost reduction; access to a larger variety of customized inputs and intermediate goods; greater flexibility in reacting to demand shocks. The latter is a relevant finding because it highlights the asymmetric impact of international linkages for firms operating in value chains during the crisis;

3)            regardless their position in the value chain, belonging to a group, national or foreign, has a positive impact on firms’ productivity.

The paper advances our knowledge on performance of firms operating in value chain under, at least, three aspects. First, it complements existing knowledge on firms in the value chain, which mostly comes from case-studies based on developing countries’ firms. Second, the findings of our study are relevant for policy-making. As we underline that position in value chain does matter, it can also be inferred which kind of firms is most vulnerable during a crisis. Third, a novel result of our paper concerns the role played by specific trade linkages to enhance performance of firms operating inside value chains.