Domestic value chain fragmentation and green total factor productivity: evidence from China’s provincial heterogeneity and mechanism analysis

Under Global Value Chain (GVC) restructuring and the deepening strategy of domestic circulation, this study investigates how Domestic Value Chain (DVC) fragmentation affects green total factor productivity (GTFP). Using multi-regional input–output tables for Chinese provinces from 2002–2017, we construct a continuous, comparable measure of provincial DVC embeddedness and apply a fixed effects model. The results show that upstream DVC integration significantly promotes GTFP, challenging the GVC view that downstream segments yield greater environmental benefits, and revealing a passive upgrading path for central and western provinces supplying key intermediates for coastal green transformation. This positive effect is stronger in southern, environmentally beneficiary, and strictly regulated provinces. Mechanism analysis indicates that scale effects and technological innovation are the main transmission channels, with applied innovation contributing 98.66% of the mediating effect, far exceeding inventive innovation. The study shifts the paradigm from GVCs to DVCs and informs differentiated regional green transition policies.