Digitalization and Global Value Chain Participation: Microdata Evidence from a Transitional Country

Abstract

In the context of Fourth Industrial Revolution, digitalization has been recognized as a key driver of long-term development in developing countries. This study aims to explore the impact of digitalization on the global value chain (GVC) participation of Vietnamese enterprises between 2005 and 2023. Utilizing a probit model, the findings show that digitalization positively affects firms’ GVC participation. The results are robust across various definitions of GVC participation. The study also finds that labor productivity, costs at custom gates, and import licenses play important roles in promoting firms engaged in GVCs. Meanwhile, firm age does not have significant effect on GVC engagement. Regarding heterogeneous effects, digitalization has a more profound effect on medium-sized firms than on large ones. Based on these findings that we propose several policy implications to encourage Vietnamese firms to adopt digitalization and deepen their involvement in global value chains.