The Influence of External Market Drivers on Global Value Chain Participation in Saudi Arabia: The Mediating Role of Technological Advancements

Mazen Mohammed Farea and Abdullah A. Aljofi ()
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Mazen Mohammed Farea: Faculty of Finance and Administrative Sciences, Business Management, Al Madinah International University, Kuala Lumpur 57100, Malaysia
Abdullah A. Aljofi: Faculty of Finance and Administrative Sciences, Business Management, Al Madinah International University, Kuala Lumpur 57100, Malaysia

Sustainability, 2025, vol. 17, issue 9, 1-21

Abstract: In today’s interconnected economy, participation in global value chains (GVCs) has become essential for firms seeking international competitiveness and economic sustainability. This is particularly relevant for emerging economies like Saudi Arabia that are pursuing economic diversification strategies. However, the relationship between external market conditions and global trade integration remains unclear, especially regarding how technological advancement influences this relationship. This study investigates how technological progress mediates the effect of external market drivers—including economic stability, regulatory compliance, technological resources, cultural adaptation, and environmental policies—on GVC participation in Saudi Arabia. Using a quantitative approach, we collected survey data from 178 key decision makers and leaders across multiple sectors involved in strategic innovation and global market integration. Analysis using partial least squares structural equation modeling revealed that external market drivers significantly influence GVC participation (β = 0.739, p < 0.01), with technological advancement playing a substantial mediating role (β = 0.460, p < 0.01). Environmental policies and technological resources demonstrated direct effects on GVC participation, while regulatory compliance was fully mediated by technological advancement. These findings contribute to understanding how digital transformation enables trade integration in emerging economies. The results provide practical insights for policymakers and business leaders, highlighting the importance of investing in digital infrastructure and technology-enabled trade facilitation to enhance global competitiveness in an increasingly digital trade environment.

Keywords: global value chains (GVCs); external market drivers (EMDs); technological advancements; digital transformation; trade competitiveness; regulatory compliance; sustainability; supply chain optimization; emerging markets; Saudi Arabia; structural equation modeling (PLS-SEM) (search for similar items in EconPapers)
JEL-codes: O13 Q Q0 Q2 Q3 Q5 Q56 (search for similar items in EconPapers)
Date: 2025
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