Gilles Dufrénot: gilles.dufrenot[at]sciencespo-aix.fr
Kiyotaka Sato: sato[at]ynu.ac.jp
The study examines GVC participation as a determinant of inward greenfield FDI at the sectoral level. Our data spans from 2005 to 2015 covering 15 manufacturing industries for 64 host countries and 88 source countries. Overall, the results show that more trade through GVCs will increase FDI inflows. Although we find that GVC participation, both backward and forward linkages, is positively associated with FDI, the effects are heterogeneous and depend on the sector and the region. For policymakers, if the host country is in the later stages of production in Basic metals and Rubber and plastic, policymakers may be well-advised to attempt to incentivize inward FDI into these sectors. This is more strongly recommended when the country is located in Europe and Central Asia, East Asia and Pacific, and North America. In contrast, Machinery and equipment does not seem to be a key sector for GVC-driven FDI policy. Also, though the electronics industry is one of the most active industries in the global production chain, its elasticity is positive, but not statistically significant.