Institutional openness and upgradation in the global value chain of manufacturing: Evidence from Chinese micro-enterprises

: Leveraging micro-level data from Chinese manufacturing enterprises spanning 2007 to 2013, this study empirically investigates the impact of institutional openness on the upgradation of manufacturing firms within the value chain and elucidates the underlying mechanisms. The empirical findings robustly demonstrate that institutional openness significantly facilitates the value chain enhancement of manufacturing enterprises. Improvements in the business environment, increased trade facilitation, and the evolution of digital trade all contribute positively to this upgrade. Heterogeneity analysis reveals that institutional openness exerts a stronger positive effect on value chain advancement for enterprises located in eastern regions, incumbent firms, non-state-owned enterprises, and those engaged in mixed trade. Furthermore, extended analyses underscore that institutional openness promotes value chain advancement by reducing institutional transaction costs, augmenting technological innovation, and deepening the division of labor. Notably, institutional openness incentivizes domestic firms to engage in high value-added activities rather than exporting on a mass scale with low value-added products. The conclusions bear significant implications for the strategic utilization of institutional openness to achieve transformative advancements in the global value chain for "Made in China" initiatives.