Microfoundations of global value chain research: Big decisions by small firms

Abstract

In this study, we introduce a unique longitudinal dataset from the Italian Ministry of Economy and Finance Annual Survey (IMEFAS) to assess how micro and small enterprises (MSEs) partake in the global economy by tapping into global value chains (GVCs). The results of the empirical analysis show that the great majority of micro and small enterprises are unable to establish direct links with GVCs. However, two sub-categories of subcontractors and branded producers were able to accomplish upgrading and partake in GVCs after the 2008 economic crisis. For both groups of firms, strategies implemented in domestic value chains contributed to their future participation in GVCs. By identifying small firms’ value chain decisions associated with their ability to access GVCs directly, this study sheds light on the microfoundations of GVCs. It paves the way for the future intersection of small business economics and GVCs, two areas of research that have seldom talked to each other.