Servicification of manufacturing in global value chains

This study examines the role of services trade and foreign direct investment (FDI) in shaping export performance among manufacturing firms participating in global value chains. Using firm-product-destination level panel data for Slovenia (2008–2020), the analysis investigates whether servicification—the growing integration of services into manufacturing—enhances firms’ export quality and export volume. The findings reveal that services imports at the destination level significantly enhance export quality, particularly for consumer and intermediate goods, while services exports positively influence export volumes, suggesting strong complementarities between goods and services trade. Outward FDI is a key driver of both higher export quality and volume, while inward FDI has mixed effects, benefiting quality but occasionally reducing export volumes. These results highlight the critical role of services trade and FDI in global value chain upgrading and suggest that policies promoting servicification and strategic international investments can enhance firms’ competitiveness in global markets.