Intangible inputs, trade-in-knowledge, and manufacturing innovation in global value chains

Abstract This article empirically investigates the contribution of intangible inputs and global value chain participation to manufacturing technological innovation on a sample of 18 manufacturing sectors from 24 EU economies and the UK in the period 2000–2013. We make use of a novel framework and corresponding dataset that: a) enables us to distinguish the origin (domestic vs. imported) and type (R&D vs. non-R&D) of externally purchased intangible inputs, and b) embeds them within the global value chain context, along with traditional backward and forward participation indicators in a knowledge production function setting. The results indicate that intangible inputs and manufacturing innovation are positively associated. Imported intangibles present a stronger link driven by R&D inputs, while the positive link of domestic intangibles reflects mainly the effects of non-R&D inputs. We further find that only forward participation is associated to manufacturing innovation. These findings provide significant global value chain-oriented policy implications regarding the importance of connectedness and market-enabling policies for the support and facilitation of European manufacturing innovativeness.