How does internet penetration affect global value chain participation? Evidence from 75 countries

Global value chains (GVCs) are central to resource allocation, industrial upgrading, employment creation, and international competitiveness, yet few studies distinguish between forward and backward participation. Using panel data from 75 countries from 2000 to 2020, this article analyzes internet’s impact on manufacturing GVC participation. We find that higher internet penetration increases forward participation but reduces backward participation. The positive effect on forward participation is weaker in countries with larger service sectors and higher population density, whereas the negative effect on backward participation is stronger in manufacturing-intensive countries. Mechanism analyses indicate that internet increases the forward participation by stimulating innovation, while it lowers backward participation by raising labour productivity and further facilitating domestic substitution of intermediate inputs. These patterns imply that developing countries that leverage the internet to upgrade may move into higher value-added segments, whereas those that fail to upgrade risk marginalization. This study fills a gap by separately identifying internet effects on forward and backward participation and offers policy guidance for improving the quality of GVC engagement. © 2025 Informa UK Limited, trading as Taylor & Francis Group.