To What Extent and How Does Internet Penetration Affect a Firm’s Upgrading in the Global Value Chain? Evidence from China

Clarifying the upgrading implications of Internet penetration is essential in the digital transformation era. This paper examines to what extent and how Internet penetration affects Chinese firms’ GVC positions. We find that Internet penetration significantly improves firms’ GVC positions by lowering transaction costs and improving resource allocation efficiency. However, this improvement effect of Internet penetration varies among firms, wherein foreign-owned, private, medium, and large-sized, high-tech-intensive firms tend to benefit more from Internet penetration. This finding will help us improve firms’ value chain position in developing countries by promoting the popularization of the Internet, narrowing the gap between developing and developed countries, and enabling us to achieve the United Nations Sustainable Development Goals 8 and 9 as much as possible.