Multinational Affiliate Between GVCs and DVCs Trade

This study aims to address the important role of foreign affiliates against the recent background of the large share of intermediate goods trade and the slack integration of global production chains. Analyzing the quantitative panel influence of foreign affiliates on international trade by using the indicators of inward-outward activities will contribute to this debate. The main empirical finding is that foreign affiliates have operated as the linchpin between Global Value Chains (GVCs) and Domestic Value Chains (DVCs). To be specific, affiliates of foreign companies engaged in inward activities, strengthen DVCs thereby leading to the further growth of the host country, while foreign affiliates of resident companies located abroad engaged in outward activities, strengthen GVCs which spur growth in the broader world economy. The updated results suggest that OECD high-income countries need continuous enforcement of the linchpin between DVCs and GVCs across foreign affiliates for larger benefits from the trade integration.