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

Bo Meng and Ye Ming

No 802, IDE Discussion Papers from Institute of Developing Economies, Japan External Trade Organization(JETRO)

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 multinationals and domestic firms along global value chains (GVCs). Taking the U.S. and China’s ICT firms’ exporting activities as a target, we find that China’s domestic ICT firms’ value chain appears as a smile curve differing from the U.S. domestic ICT firms’ inverted-U curve, which reflects the considerable difference in their technical specialization in joining GVCs; multinationals 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 in China; China’s domestic firms have increasingly plugged into most ICT value chains. All findings reflect how “sticky” the interdependency among countries along GVCs is and c an thus help understanding the impact of the U.S.–China trade war.

Keywords: smile curve; multinationals; global value chain; trade in value-added; industrial upgrading; ICT; Business enterprises (search for similar items in EconPapers)
JEL-codes: D57 F13 F15 F6 (search for similar items in EconPapers)
Date: 2020-12
References: Add references at CitEc
Citations: View citations in EconPapers (5)

Published in IDE Discussion Paper = IDE Discussion Paper, No. 802. 2020-12

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