Does global value chain participation improve technical efficiency of SMES? Evidence from Vietnam

This study disentangles the relationship between GVC participation and the technical efficiency of SMEs in Vietnam. We combine panel data obtained from the GSO Enterprise Census survey of SMEs in Vietnam including 567,866 enterprises observations from 2015 to 2018. Regarding global value chain participation (GVC), TiVA databases by OECD are used to track GVC integration at sectoral level. We employ Stochastic frontier analysis (SFA) to gauge the relationship between a firm's technical efficiency and GVC participation in two modes of participation: backward integration and forward integration. The findings show the positive impacts of backward participation in rising technical efficiency levels. However, SMEs in sectors with deeper forward participation tend to have low technical efficiency. We find the heterogeneity in firm efficiency regarding firm-specific factors and location.

Keywords: GVC participation, SMEs, Technical efficiency.