Global Value Chains and Nascent Enterprises: Evidence from 39 Developing Countries

This study examines the role of global value chains (GVCs) in the rise of developing countries' nascent enterprises within the purview of the strength of investors' protection, governmental supports and policies, labour productivity, and economic growth, covering annual data from 2006 to 2020. This research applies a novel and sophisticated econometric method, the quantiles via moments approach, to analyse the annual data properties. This method is a good fit for data and sample units with heterogeneity issues. Furthermore, apart from other quantile approaches, this technique can control the locational and scaling heterogeneities in the responsiveness of the dependent variable to the independent variables in the computational procedure. This study finds that the GVCs are monotonically conducive to strengthening the nascent enterprises across entire quantiles. Besides, the investor's protection strength, governmental supports and policies, and economic growth stimulate the new enterprises in an undulating way over various quantiles. However, the role of the labour force is futile in strengthening the nascent enterprises of developing countries at all quantiles. This study is a novel attempt to consider the relevance of GVCs' potential to the contour of the developing economies' nascent entrepreneurial development within the purview of the strength of investors' protection, governmental supports and policies, labour productivity, and income growth. More importantly, checking the rationale of the “Lead Market Method” principle in the nexus between GVCs and developing countries' nascent enterprises illustrates this study's originality in the existing pieces of literature. Besides, this research also establishes income growth's efficacy to stimulate developing nations' budding enterprises, reversing the “Schumpeter Mark-2” proposition, revealing that established firm' potential, resource accumulations, and competencies result in the “creative accumulation” in economic development. Finally, this study also checks the theory of “Labour Market Pooling” and does not find this theory's relevance to the developing countries' context due to the labour force's unproductive role in the rise of nascent enterprises.