The combined contribution of intangible capital and global value chain participation to productivity (D6.5)

Deliverable on the relationship between four types of intangibles and global value chain participation and their contribution to productivity.

Using industry level data and a panel of 14 countries observed from 2000 to 2014, this deliverable investigates the impact of four types of intangibles (R&D, software and databases, design and economic competencies) and global value chain (GVC) participation on productivity both separately and combinedly. In the literature, intangibles and GVC participation have been studied mostly separately, with some concentrating on how GVCs improves productivity (Baldwin et al., 2014) and some others on how intangibles encourage participation in GVCs (Jona-Lasinio et al., 2016). Instead, this deliverable tests the linkage between these two factors in improving productivity efficiency via interaction terms.

Positive effects are found both for all types of intangibles considered and for GVC measures. Furthermore, the results demonstrated the moderating role of intangibles in the relationship between GVC and productivity. From the GVC side, both backward and forward integration measures are found to be significantly effective in enhancing productivity, meaning that participating to GVC is beneficial both when receiving and when providing intermediates from and to others.

These results confirm the theory according to which it is beneficial for industries and countries to specialize on specific portions of the production chain, relying on trade for those portions on which they are not specialized. From the intangibles side, software, R&D, design and economic competencies are all found to positively drive productivity. However, significant differences are found when considering interactions, with design that is found to be the only intangible type whose combined effect is not significant.

See the paper here.