Embedding in Global Value Chains, Innovative Human Capital and China’s Manufacturing Upgrades

Abstract

Since the reform and opening up, China has actively participated in the Global Value Chain (GVC) division of labor system and achieved rapid economic growth and moderate industrial upgrading. However, with the rapid development of GVC, more and more countries are participating in the global competition, and China’s manufacturing industry is facing the serious challenge of “two-way squeeze” from the return of high-end and low-end transfer. This paper constructs a theoretical framework of GVC embedding and innovative human capital accumulation affecting manufacturing upgrading, and empirically examines the impact of GVC embedding location enhancement and innovative human capital accumulation on manufacturing upgrading from the perspective of product upgrading and efficiency upgrading. The findings show that innovative human capital accumulation enhances the positive effect of GVC embedding on product upgrading and efficiency upgrading. The extent of this effect varies across types of industries; for product upgrading, the positive regulating effect of innovative human capital on the positive relationship between embedded location and China’s manufacturing upgrading is most pronounced in labor-intensive industries; for efficiency upgrading, innovative human capital plays a more significant positive regulating effect in capital-intensive and technology-intensive industries. Based on the above conclusions, the Chinese government should strengthen diversified investment in high-level talents and invest in the expansion of cooperative learning platforms in the upper, middle and lower reaches of the global value chain manufacturing industry, establish and improve relevant laws and regulations on intellectual property protection and transformation of innovation results, and solve the problem of deviation of talents from optimal allocation, so as to better exert the regulating effect of innovative human capital and promote the upgrading of China's manufacturing industry.