Impacts of digital business on global value chain participation in European countries

As the first empirical study of the nonlinear effects of digital business on global value chains (GVC), we provide insight into the nonlinear effects of digital business on the global value chain (GVC) values. We employ four indicators, including the value of online selling, sales through E-commerce, and customer relationship management (CRM) usage, to capture the prevalence of digital business in the economy. By testing a sample of 25 European countries that have been analyzed using various econometric techniques over the period 2012-2019, our estimation results confirm that GVC values are a U-shaped function of digitalization. That is, an increase in digitalization pervasiveness initially induces more significant risks and uncertainties, hindering European countries from getting involved in or scale-up within the GVC. However, a rise in digitalization pervasiveness goes beyond a specific threshold, which facilitates GVC activities as more opportunities are created. Furthermore, our findings suggest that digital business contributes significantly to reducing the adverse influences of global uncertainty on the GVC values, while the marginal effects of digital business on GVC values become more pronounced in countries with the most advanced institutional structure.