Link or Languish? A Long‐Run Empirical Analysis of Production Network Positioning, Embeddedness and Growth

ABSTRACT Production networks influence economic outcomes through several channels. On the one hand, linkages within such networks enhance productivity and have been pivotal for development. On the other hand, integration into Global Value Chains (GVCs) can drive economic upgrading. This paper provides a comprehensive empirical analysis of these mechanisms over the long run. Using a long‐run multi‐country input–output dataset (1965–2014), we trace the origins and evolution of global production networks (GPNs). By employing parsimonious measures of production structure (namely, upstreamness and downstreamness), we show that both national and international linkages relate to different dimensions of economic performance. Although highly correlated, the two measures exhibit distinct associations with sectoral performance. At the aggregate country level, only downstreamness remains robustly associated with growth, even after controlling for an extensive set of covariates. Finally, we show that growth is not driven by centrality in GPNs per se, but by embeddedness through its connection to the share of intermediate goods in production.