Digitalisation and Global Value Chains in BRICS+ Economies: Divergent Effects of Consumer and Business Use Across Sectors

ABSTRACT

This study analyses the heterogeneous impact of digitalisation on the global value chain (GVC) participation of BRICS+ economies. It draws on a bilateral panel dataset with more than 2.2 million observations during the period from 1995 to 2020. We employ a Poisson pseudo‐maximum likelihood (PPML) estimator with high‐dimensional fixed effects (HDFE), suitable for examining GVC indicators, as it controls heteroskedasticity and zero observations. By distinguishing between supply‐side (business) and demand‐side (consumer) digitalisation effects with further division into domestic and foreign components, our study establishes dual and asymmetric impacts of digitalisation on GVCs. We find that consumer digitalisation invariably reduces both forward and backward linkages in GVCs and further generates localisation away from cross‐border linkages. Conversely, business digitalisation is significantly associated with GVC integration at the sectoral level, particularly moderated through enhanced coordination and transaction efficiency. Sector‐level analysis reveals pronounced heterogeneity. Manufacturing and services respond differently to domestic and foreign digital shocks, while construction and agriculture show muted or divergent responses. Our findings suggest that digitalisation is not a monolithic driver of globalisation or participation in global production but a dual‐faced force requiring targeted vertical industrial strategies. To ensure inclusive GVC participation, policymakers in emerging economies may consider prioritising sectoral absorptive capacity and aligning domestic standards with emerging global trade governance frameworks, such as the WTO's Joint Statement Initiative on E‐commerce, to mitigate digital fragmentation and foster cross‐border linkages.