Digitalisation, global value chains, and enterprise formalisation: A cross-country, firm-level analysis

2021 Fiscal Year Research-status Report

• Project/Area Number: 21K13296
• Research Institution: 国際連合大学サステイナビリティ高等研究所
• Principal Investigator: KORWATANASAKUL UPALAT 国際連合大学サステイナビリティ高等研究所, サステイナビリティ高等研究, 研究員 (50879830)
• Project Period (FY): 2021-04-01 – 2023-03-31
• Keywords: digitalisation / firm-level analysis / formalisation / global value chains / informal enterprises

Outline of Annual Research Achievements

Except the qualitative analysis, the research has been conducted according to the proposed schedule. Currently, the author is working on the quantitative analysis and expects to finish the first draft by August 2022. This study examines the relationship between digitalisation, formalisation, and global value chain (GVC) participation. The study employs probit and tobit estimations, utilising pooled cross-sectional firm-level data from the World Bank’s Enterprise Surveys. The data covers 116 countries and 56,304 enterprises for 2007‒2019. The results show that enterprises with digital connectivity are more likely to operate in the formal sector. Furthermore, this study finds that formalisation enables enterprises to participate in the GVCs and increase the level of GVC participation.

Current Status of Research Progress

2: Research has progressed on the whole more than it was originally planned.

Reason

Due to the current situation of COVID-19, the UNU-IAS does not allow researchers to travel abroad. Therefore, it is inevitable to omit the qualitative analysis part and to only rely on the quantitative analysis. If the situation allows, the follow-up qualitative analysis will be conducted.
Except the qualitative analysis, the research has been conducted according to the proposed schedule. Currently, the author is working on the quantitative analysis and expects to finish the first draft by the end of August 2022.

Strategy for Future Research Activity

This study aims to address two research questions that disentangle the relationship of digitalisation, formalisation, and GVC participation: Does digitalisation affect enterprise formalisation? Does formalisation facilitate enterprises in joining the GVCs? The main estimation methods are probit and tobit estimations at the firm level, utilising pooled cross-sectional data from the World Bank’s Enterprise Surveys. The data covers 116 countries and 56,304 firms for the period 2007‒2019. The estimated results demonstrate that firms with digital connectivity such as the usages of email and website are more likely to be formally registered. Furthermore, being formally registered has a positive predicted impact on GVC participation.

Causes of Carryover

Due to the current situation of COVID-19, the UNU does not allow researchers to travel abroad. Therefore, it is inevitable to omit the qualitative analysis part and to only rely on the quantitative analysis. If the situation allows, the follow-up qualitative analysis will be conducted.