JCI-WP-2023-01 Does Digitalization Promote the Servicification and GVC Activities of Chinese Manufacturing Firms?

This paper uses detailed firm-level and transactional-level trade data to examine the causal relationship between digitalization and servicification in Chinese manufacturing firms. Using the novel approach of text mining and anaysis, this paper constructs two firm-level measurements of digitalization and servicification. Further, it explores the impact of digitalization on services integration within manufacturing activities. We find digitalization to have played a crucial role in enhancing manufacturing servicification, enabling firms to produce and sell more service products. We also highlight that the two mechanisms through which digitalization promotes servicification are digital technology and profitability. This paper contributes to the existing literature by developing the micro-level evidence of the digital transformation occurring within Chinese manufacturing firms and sheds light on the emerging service-led global value chain (GVC) upgrading pattern.

Key Words: Digitalization, Servificiation, Manufacturing Firms, Text mining, Text analysis