Smile curves in global value chains: Foreign- vs. domestic-owned firms; the U.S. vs. China

Bo Meng and Ming Ye

Structural Change and Economic Dynamics, 2022, vol. 60, issue C, 15-29

Abstract: This paper uses the “smile curve” mapping tool with a Y-axis for value-added ratio and an X-axis for production stages to identify value-added gains, positions, and interdependencies of foreign- and domestic-owned firms in global value chains (GVCs). Taking the U.S. and China's ICT firms’ exporting activities as a target, we find that China-based domestic-owned ICT firms’ value chain appears as a smile curve differing from the U.S.-based domestic-owned ICT firms’ inverted-U curve, which reflects the considerable difference in their technical specialization in joining GVCs; foreign-owned firms are good at utilizing each country's comparative advantages and can thus arrange value chains as smile curves regardless of whether they are located in the U.S. or China; China-based domestic-owned firms have increasingly plugged into most ICT value chains. All findings reflect how “sticky” the interdependency among countries along GVCs is and can thus help understanding the impact of the U.S.–China trade war.

Keywords: Smile curve; Multinational enterprise; Global value chain; Trade in value added; ICT (search for similar items in EconPapers)
Date: 2022
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Citations: View citations in EconPapers (6)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:streco:v:60:y:2022:i:c:p:15-29

DOI: 10.1016/j.strueco.2021.10.007

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