Decoding specialisation patterns in global value chains: the role of multinationals and domestic firms

Aleksandra Kordalska, Oscar Lemmers, Magdalena Olczyk and Mark Vancauteren

International Journal of Emerging Markets, 2025, vol. 20, issue 13, 313-336

Abstract: Purpose - This paper aims to examine the role of multinationals (MNEs) and domestic firms and their exporting channels in explaining the functional specialisation (FS) pattern. In particular, we consider research and development (R&D) and fabrication value chain functions. Design/methodology/approach - To identify the FS pattern, we apply the FDI-based approach. The export intensity of domestically and foreign-owned firms is assessed by decomposing the Organisation for Economic Co-operation and Development Activity of Multinational Enterprises (AMNE) database. We employ a generalised structural equation model to evaluate the relationship between FS and the exporting channels of MNEs and domestic firms, drawing on data from 2003 to 2018. Findings - The results indicate different roles of MNEs and domestic firms in supporting global value chain activities. The direct export intensity of domestic firms enhances FS in production, while the direct export intensity of MNEs supports R&D function. Detailed analyses for EU15 and Central Eastern European (CEE) countries indicate two different types of firms and their different export channels boosting specialisation in R&D activities. For EU15, it is the direct export of MNEs, whereas CEE countries strengthen the R&D function through the indirect export of domestic firms. Practical implications - Our findings suggest that European Union (EU) countries should consider more flexible, task-specific foreign direct investment incentives, particularly for R&D, rather than targeting specific sectors. For CEE countries, promoting the indirect export of domestic firms by facilitating matchmaking with local exporters could enhance specialisation in R&D. Originality/value - The novelty of this paper lies in analysing the unexplored relationship between FS and firm heterogeneity, considering ownership structure and export channels, with insights specific to two EU country groups: EU15 and CEE countries.

Keywords: Global value chains; Foreign direct investment (FDI); Export intensity; Domestic firms; Foreign-owned firms; Functional specialisation (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eme:ijoemp:ijoem-03-2024-0400

DOI: 10.1108/IJOEM-03-2024-0400

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