Production Networks, Profits, and Innovative Activity: Evidence from Malaysia and Thailand

Author: 
Ganeshan Wignaraja
Jens Krüger
Anna Mae Tuazon
Description: 
ADBI Working Paper Series
JEL codes: 
Abstract: 
Cross-border production networks have been playing an increasingly important role in the Association of Southeast Asian Nations (ASEAN) countries’ trade in recent years, but micro-level studies are rare. This paper uses firm-level data from the two most active ASEAN countries in production networks (Thailand and Malaysia) and examines the effect of participating in production networks on profits and technological capabilities of firms. The empirical results show that participating in production networks raises profits. The evidence further suggests that participation in production networks is also positively correlated with technology upgrading, measured by a technological capabilities index.
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