The importance of being a capable supplier: Italian industrial firms in global value chains

This article argues that joining global value chains may be decisive for supplier firms in developed countries by providing incentives and opportunities to upgrade their capabilities to export and innovate. We describe an investigation conducted on a sample of Italian manufacturing firms, drawn from a database spanning 1998-2006 that compares labour productivity and total factor productivity between supplier and final firms at the same level of demonstrated ability (measured in terms of exporting and innovating). Findings indicate that traditional' supplier firms are less productive than final firms; as the ability of supplier firms increases, their productivity shortfall decreases to the extent that for those able to both export and innovate, there is no statistically significant difference in productivity between supplier and final firms.