Putting intangible inputs and global value chains into work: New sources of manufacturing comparative advantage in global markets

Abstract This paper studies the contribution of intangible inputs and global value chain (GVC) participation to manufacturing specialization and the creation of comparative advantage in global markets. We use an input–output framework for the quantification of intangibles, which, among others, allows us to distinguish between domestically produced and imported intangible inputs and study disembodied flows of intangibles (knowledge) across domestic and GVCs. This framework is applied to study the determinants of export specialization of a sample of 18 manufacturing sectors from the G7 economies during the period 2000–2014. Our results suggest that intangible inputs are key contributors to the export specialization of the manufacturing sectors of advanced economies, reflecting their role as sources of comparative advantage and the dynamics of the process of servicification as a strategy for enhancing manufacturing specialization. Furthermore, consistent with our theoretical propositions, the results highlight the importance of domestic intangible inputs, but we also identify that imported intangible inputs appear to be non-rivalrous and provide specialization benefits of a lesser magnitude. Backward participation in GVCs is also found to boost export specialization.