Impact of global value chains integration on firm performance in Sub-Saharan Africa: evidence from micro panel data

Abstract

This paper examines the impact of global value chains (GVCs) participation on firm performance, using panel data for a sample of 3,790 manufacturing firms distributed in 22 Sub-Saharan African countries. To account for time-invariant and time-variant unobserved heterogeneity, the study adopted matching combined with difference-in-differences methodology (PSM-DiD) estimators. The results indicated that participation in GVCs has positive and significant impact on labour productivity and sales growth, while it has no significant effect on capacity utilisation. Disaggregating GVCs into different components, the analysis revealed some variations in the impact of GVCs on firms’ performance. For instance, while exports are found to exert a positive and significant effect on productivity, imports have no important role in influencing firm performance. The paper concluded with some policy recommendations, suggesting that facilitating firms’ integration into GVCs is an effective strategy to boost manufacturing sector in Africa.