GVCs embeddedness and its effects on industrial productivity: Evidence from Turkish manufacturing industries

This dissertation investigates the embedding degree and embedding position (referred to as GVC embeddedness throughout this study) of Turkish manufacturing industries in Global Value Chains (GVCs) and their implications for industrial Total Factor Productivity (TFP) levels and growth. This study aims to understand the mechanisms through which GVC participation impacts industrial performance and explores potential variations in these effects across different technologically intensive industries and classes. Utilizing quantitative methods, data from the Trade in Value Added (TiVA) database were employed to analyze GVC embeddedness, allowing for comparisons among industries and technological classifications. Additionally, a dynamic panel data estimator, the two-step system GMM, is applied to examine the relationships between GVC embeddedness and TFP levels and growth, while addressing endogeneity issues. Data from reputable sources, including the Turkish Statistical Institute (TUIK), International Financial Statistics (IFS), and OECD-WTO TiVA database, among others, provide a robust basis for analysis. The findings reveal distinct patterns of embeddedness across different industry sectors: the "Electrical Equipment" and "Basic Metals" industries consistently display the highest levels of embeddedness across all industries, while the "Other Transport Equipment" industry consistently lags behind. The medium-low-tech class demonstrates the highest degree of embeddedness in GVCs, whereas the high-tech class displays the lowest, indicating its reliance on foreign intermediate inputs for production. Our findings for the overall industry analysis reveal that while GVC embedding degree and embedding position have insignificant effects on TFP levels, they do have a significant impact on TFP growth. FDI, financial development, government subsidies, and trade openness significantly influence both TFP and TFP growth. In low-tech industries, the GVC embedding degree, FDI, R&D expenditures, and trade openness play crucial roles in influencing TFP levels, whereas for TFP growth, the GVC embedding degree, FDI, and financial development exhibit significant effects. In high-tech industries, the direct impact of GVC embeddedness on TFP and TFP growth is limited, along with other factors such as FDI, financial development, government subsidies, human capital, R&D expenditures, and trade openness displaying significant influences. The findings have significant implications for policymakers, industry practitioners, and researchers. Specifically, the significant positive impact of GVC embedding degree on TFP growth in low-tech industries emphasizes the importance of fostering greater integration into GVCs for productivity improvement. Moreover, the limited direct influence of the GVC embedding position on TFP suggests that positioning within the value chain may not be a decisive factor in productivity gains. Instead, attention should be directed towards promoting financial development, human capital, and R&D investments to foster productivity growth in both the low-tech and high-tech sectors. The heterogeneity of the effects across industries and technological classifications calls for tailored strategies to address specific challenges and opportunities. Overall, this study enhances the understanding of how GVC embeddedness influences productivity in the Turkish manufacturing sector and supports evidence-based policymaking and industry strategies for sustained economic growth.