The Role of the Global Value Chain in Improving Trade and the Sustainable Competitive Advantage: Evidence From China’s Manufacturing Industry

In the domain of globalization, the global value chain (GVC) is formed across diverse economies. Owing to the expansion of economic globalization and the resultant global trade liberalization, the geographical isolation of production and consumption has resulted in the transfer of polluting emissions from advanced economies to developing states. Developing economies, falling in the middle and low end of the GVC, have to strive hard to expand their production in the GVC, while simultaneously addressing the consequent environmental damage and attending to the core environmental concerns of sustainable growth, energy preservation and drastic cuts in CO2. This paper addresses how manufacturing subsidiaries can improve their low-carbon innovation ability and help to achieve a sustainable competitive advantage through the embedded GVC. Data were gathered employing interview and survey methods, 31 manufacturing companies and 56 enterprise groups across 16 Chinese provinces were selected as the case study. A partial least square structural equation modelling was adopted to analyse the responses. The results indicate that the embedded GVC significantly enhances low-carbon innovation capability and promotes a sustainable competitive advantage. This study proposes that companies should continuously identify high-quality resources from the GVC and discover ways of integrating internal and external carbon innovation resources to form innovation capabilities.