Friendshoring: The role of geopolitical distance in global value chain

Thang Ngoc Doan () and Trang Ha Le ()
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Thang Ngoc Doan: Banking Academy of Vietnam
Trang Ha Le: Banking Academy of Vietnam

International Economics and Economic Policy, 2025, vol. 22, issue 4, No 17, 25 pages

Abstract: Abstract This paper investigates the impact of geopolitical distance on a country’s involvement in the global value chain (GVC), utilizing a comprehensive dataset of country pairs from 1995 to 2020, which includes 126,108 observations. GVC participation is assessed by the value-added content in exports, focusing on backward linkage from a reference country’s perspective. We measure geopolitical distance using ideal point distance, based on voting behavior at the United Nations General Assembly. Through extensive robustness tests, our main findings suggest that geopolitical distance significantly impedes backward participation. The effects of geopolitical distance have intensified in recent years and differ across regions, primarily affecting backward participation by amplifying sourcing cost. The study’s results remain consistent across various model specifications, alternative measurements, and controls for endogeneity. These findings have important implications for both managerial strategies and policymaking.

Keywords: Friendshoring; Geopolitical distance; Global value chain; International trade; Gravity model (search for similar items in EconPapers)
JEL-codes: F1 F2 F6 Q54 (search for similar items in EconPapers)
Date: 2025
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DOI: 10.1007/s10368-025-00696-2

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