GVC embeddedness and innovation performance – an analysis across 28 European countries

Purpose - This study has the following aims. First, it tries to clarify the relationship between global value chain (GVC) participation and innovation performance. To date, research generated mixed results. Secondly, it explores a novel way of investigating GVC participation by focusing on the sectoral level in which organizations operate using the concept of GVC embeddedness, which has not been investigated to date. Design/methodology/approach - Data from two sources are combined. The European Company Survey of 2019 provides data about the innovation performance of organizations. These data include measures about production and process. At the sectoral level, these company-level data are combined with data from the Trade in Value Added from the Organization for Economic Cooperation and Development. In total, more than 20,000 companies were investigated, which operate in 15 sectors in 28 countries. This three-level structure is analysed using multilevel ordered probit analyses. Findings - The results show that forward participation and backward participation at the sectoral level are positively related to product innovation and process innovation. The probability of not being engaged in innovation is reduced through GVC embeddedness. And, the probability of generating incremental and radical innovations (both regarding products and processes) increases if GVC participating at the sectoral level is higher. Originality/value - This study is the first to relate sectoral GVC embeddedness to the innovation performance of organizations.