Can special economic zones in China enhance firm's global value chain position?

Abstract

As a widely used global policy tool, the establishment of special economic zones (SEZs) in the era of global value chains (GVC) is receiving increasing attention. Using a sample of Chinese firms, we analyzed the impact of SEZ policy on the GVC position of firms in developing countries and the mechanisms analysis determining their effects at the micro level using the difference-in-differences (DID) method. The results showed that the establishment of SEZs improved firms’ GVC position, especially for non-state-owned firms, general trade firms, firms in medium-or-high-technology industries, and firms in China's costal area. SEZs enhance firms' GVC position through productivity gains, cost reductions, and improved access to financing. Further analysis revealed the moderating effect of level of market development and management efficiency. The findings contribute to understanding SEZ policies and their role in firms' GVC upgrading, with implications for sustainable economic development.