Global value chains and servicification of manufacturing: Evidence from firm-level data

Hyunbae Chun, Jung Hur and Nyeong Seon Son

Japan and the World Economy, 2021, vol. 58, issue C

Abstract: Recent literature on global value chains (GVCs) has mainly focused on manufacturing firms’ global sourcing and investment strategies. Our question here is that, if the manufacturing firms established foreign manufacturing plants and engaged in sourcing inputs and exporting outputs, have they changed their domestic employment composition toward service workers? This is what we call servicification of manufacturing firms in this paper. To answer this question, using Korean firm-establishments matched data, we examine changes in the shares of service employment in manufacturing firms from 2008 to 2013, when those firms are participating in both import-and-export and foreign direct investment (i.e., GVC firms). We find that the two-way trading firms that own manufacturing plants in foreign countries—and particularly in nearby foreign countries—have changed their domestic employment structures to increase the number of service workers they employ. Moreover, the relatively greater increase in the share of R&D workers than of wholesale-and-retail workers serves as further evidence of the servicification of domestic manufacturing. Overall, our findings suggest that Korean firms who engage in GVCs through both trade and foreign direct investment have reorganized domestic labor structure to be able to provide high value-added headquarter services for their manufacturing plants that are closely located in foreign countries.

Keywords: Global value chains; Manufacturing; Multinational enterprise; Servicification (search for similar items in EconPapers)
JEL-codes: F23 F66 L23 (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:japwor:v:58:y:2021:i:c:s0922142521000219

DOI: 10.1016/j.japwor.2021.101074

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