Digital–Real Fusion and Global Value Chain Upgrading in Manufacturing Firms: From a Socio-Technical Systems Perspective

Abstract

Global value chains (GVCs) are being reconfigured by trade-policy uncertainty, geopolitical fragmentation, supply-chain disruptions, and the accelerated diffusion of digital technologies. Drawing on a socio-technical systems perspective, this study distinguishes the technical subsystem of digital and manufacturing knowledge, the social-organizational subsystem of routines and resource allocation, and the interorganizational coordination interface linking suppliers and customers. Using panel data on Chinese listed manufacturing firms from 2008 to 2024 and a patent-citation-based measure of cross-domain technology fusion, it examines the association between digital–real technology fusion and firm-level GVC upgrading. GVC upgrading is proxied by the firm-level value-added rate and assessed using two alternative measures. The results show a positive and statistically significant association. Channel analyses provide evidence consistent with knowledge recombination and innovation capability, resource allocation efficiency and total factor productivity, and supply-chain coordination and resilience. The association is stronger among firms with stronger patent-technology bases, state-owned enterprises, firms in more competitive industries, and firms located in regions with more advanced digital infrastructure. Further analysis indicates that trade-policy-uncertainty exposure is negatively associated with GVC upgrading and that digital–real technology fusion attenuates this negative association. The GVC-upgrading proxy is also positively associated with firm operating performance.