The Performance of Plants Inserted in Global Supply Chains: A Look at Vertically-Linked Affiliates

An increasing number of case studies provide evidence that the interaction between global actors and firms in developing countries, particularly within the context of global supply chains, translate into critical knowledge acquisition. Examining vertically-integrated affiliates located in Chile we provide systematic evidence showing that foreign affiliates inserted in global supply chains tend to have larger capabilities in terms of size, skills and productivity, are more export oriented, and produce goods of higher quality, as measured by unit values, than other exporters in the country. We show that the superiority of these establishments increase with the age of the multinational indicating that time is required to accumulate the necessary skills. We also show that the edge of foreign affiliates in terms of the export outcomes decreases but does not disappear completely after these differences in plant capabilities are controlled for, a result that suggests that additional factors, most likely of intangible nature, might be behind the improved export performance and higher quality of goods of these establishments