New BERG Working Paper No. 170 by Philipp Mundt, Uwe Cantner, Hiroyasu Inoue, Ivan Savin and Simone Vannuccini published!

In the BERG Working Paper Series Philipp Mundt, Uwe Cantner, Hiroyasu Inoue, Ivan Savin and Simone Vannuccini have published a new paper entitled "Market Selection in Global Value Chains".

A complete overview of all BERG Working Papers published so far can be found here.

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Abstract 

The idea that market selection promotes survival and expansion of the “fittest” producers is a key principle underlying theories of competition. Yet, despite its intuitive appeal, the hypothesis that companies with superior productivity also exhibit higher growth lacks empirical support. One reason for this is that companies are not “islands” that produce goods and services in isolation but depend on their suppliers in value chains, implying that excessive growth can also originate in the superior productive performance of these value-chain partners. Neglecting these dependencies in empirical tests of the selection hypothesis leads to measurement errors and may impair the identification of competition for the market. In this paper, we use data from the World Input-Output Database to capture these global value-chain relationships in an empirical test for market selection, studying competition between country-sectors for a global market share in different economic activities. Compared to the conventional view that focuses on individual productivities, our value-chain perspective on the productivity-growth nexus provides stronger empirical support for market selection. This suggests that the scope of selection reaches beyond the level of individual producers and requires a systemic analysis of production networks. Our findings contribute to a better understanding of the determinants of selection in competitive environments and also represent a novel application of global value-chain data.