1. Introduction
In the context of the current economic globalization, the rapid development of industry has brought many global environmental problems [
1]. The Asian Development Bank Working Group’s report “Towards an Environmentally Sustainable Future: A Country Environmental Analysis of the People’s Republic of China” highlights the serious environmental pollution problems caused by China’s rapid industrialization. Examining the pollution status of Chinese industrial enterprises is crucial for addressing global climate and ecological challenges. Moreover, in the 21st century, lower trade costs and improved information technology have facilitated the growth of a global value chain (GVC; see
Appendix A for other abbreviations used in this paper). The GVC, as a new form of the international trade division of labor, distributes production across the world, but also creates uneven environmental pollution among different actors involved in various tasks [
2].
China is an important participant in the international trade division of labor. Since the implementation of China’s reform and opening-up policy, China’s participation in the GVC has increased to 44.49%, becoming a veritable “world manufacturing factory” [
3]. However, the development of the GVC is accompanied by the intensification of environmental pollution, especially in industrial sectors with large export trade. The Statistical Bulletin of China’s National Economic and Social Development in 2020 shows that China’s total energy consumption reached 4.98 billion tons of standard coal. Industrial pollution emissions are still rising year by year. In the process of participating in the GVC, Chinese manufacturing enterprises are locked into low-value-added segments, which not only have limited profit margins but also often become a means of pollution transfer from developed countries [
4]. Facing increasingly severe environmental constraints and the pressure of public opinion from domestic and foreign communities, it is particularly imperative to clarify the inherent link between the position of Chinese enterprises in the GVC and their environmental performance. This is beneficial both for understanding the current situation of pollution in the country and for protecting national interests in international trade.
Currently, many scholars refer to the environmental friendliness of enterprises as “corporate environmental performance”. They explore the factors that affect environmental performance from three perspectives: society and culture, government, and business. With the increasing attention towards environmental issues in society, enterprises have gradually incorporated environmental protection factors into company governance and strategic development to maintain their business image [
5]. In terms of society and culture, Lai et al. [
6] explored the influence of religious culture on the enhancement of corporate environmental performance, considering the Chinese belief system of “the unity of heaven and man”. Chen et al. [
7] asserted that social trust encourages members of society to obey social norms and improve corporate environmental performance. In terms of government behavior, Wang et al. [
8] pointed out that the privatization process of state-owned enterprises has confirmed that the improving response to the government’s goals will promote the improvement of the company’s environmental performance, which has confirmed the important role of the government to a certain extent [
9,
10]. Zhang et al. [
11] suggested that government supervision is the main source of environmental pressure on corporations, which has contributed to the improvement of companies’ environmental performance. In terms of corporate behavior, most of these studies follow contingency theory, which argues that corporate behavior matches the environment to achieve higher corporate returns [
12]. Corporate social responsibility [
13], corporate CEO attributes [
14], and the political connections of business management [
15] can affect corporate environmental performance.
However, the above literature discusses only single-firm-level influences. With trade integration becoming an increasingly dominant feature of global economic development, it is not sufficient to focus solely on the impact of individual firm behavior on corporate environmental performance. In fact, the GVC, as the production division of labor and benefit distribution chain of international trade, is also a pollution-manufacturing chain closely related to the production division of labor. The process of spatial allocation of production factors and trade flows by the GVC through an international division of labor network is also the process of the global placement of environmental pollution [
16]. Therefore, it is imperative to explore the influence of the position of firms embedded in the GVC on their environmental performance to reduce environmental pollution and protect the environmental interests of commodity-producing countries.
To address this gap, our study breaks new ground by conducting an empirical study on the impact mechanism and effect of the different positions of the GVC on corporate environmental performance from domestic and foreign perspectives based on the clarification of the theoretical mechanism of the positions of the GVC on corporate environmental performance.
This paper makes the following possible contributions: first, it provides a quantifiable and comparable measure of the upstream degree of each enterprise in the GVC from the perspective of micro enterprises, which are the main actors in pollution prevention and control. It systematically examines how corporate positions in domestic and foreign production affect their pollution emissions. Second, it uses a comprehensive indicator based on various pollutants such as industrial wastewater, exhaust gas, and sulfur dioxide, avoiding the bias of using a single pollutant. Third, it explores the mechanisms of how the import and export positions of enterprises in the GVC influence their green production efficiency and environmental performance, based on endogenous growth theory, low-end capture theory, price-cost-plus theory, and social responsibility theory. It also investigates how the domestic production process of the GVC affects pollution emissions through green production efficiency, based on the reverse mechanism and reverse development capability theory. By explaining these micro-theoretical mechanisms, we deepen our understanding of the intrinsic link between the GVC position and environmental performance. We construct a theoretical framework for analyzing the impact of domestic and foreign value chain division on an enterprise’s environmental performance. Fourth, it explores the ways to mitigate the pollution dilemma from both internal and external aspects of enterprises. Moreover, it empirically analyzes the dynamic impact of GVC position on environmental performance, considering that it changes over time and has different effects on pollution emissions. This provides new insights for enterprises to reduce pollution emissions from a dynamic perspective.
The paper is structured as follows:
Section 2 reviews the literature and develops the hypotheses.
Section 3 describes the model and data.
Section 4 performs an empirical analysis that addresses endogeneity and tests the mechanisms.
Section 5 conducts an extended analysis that examines the ways to overcome the corporate environmental performance dilemma.
Section 6 discusses the results.
Section 7 concludes and provides policy recommendations based on the findings.
Section 8 acknowledges the limitations of the paper and suggests directions for future research.
6. Discussion
This study has the following four main findings.
First, this paper systematically describes the location of firms’ division of labor from the perspective of domestic and foreign markets. In accordance with the findings of He and Huang (2021) [
39], firms can achieve energy savings and emission reductions by increasing upstream exports or retreating to their home countries. Most of the studies concluded that a higher degree of GVC participation is beneficial for energy saving and emission reduction [
40]. However, on the one hand, this literature mainly focuses on studying the degree of international division of labor and fails to capture the impact of the location of participation. In a global context, with a high degree of fragmentation of the production chain, the differences in firms’ international operations are increasingly reflected in their position in the value chain division of labor, and not only in the extent to which they carry out export activities [
26]. On the other hand, firms are both importers of intermediate goods and exporters of final goods. The existing literature does not provide a more accurate picture of the specific position of firms in the chain in terms of both exports and imports. At the same time, the international division of labor is vulnerable to uncertainty. Most firms choose to expand domestic production, and the number of domestic production links also affects the way firms participate in the international division of labor and further affects environmental performance [
41], which is partially confirmed by the empirical evidence in this paper.
Second, this paper enriches the mechanism of GVC on environmental performance. Previous studies have shown that there is a nonlinear effect of GVC participation on pollution emissions [
40], but failed to identify the mechanism of action. In this paper, the mechanism is tested by introducing GTFP. Studies have shown that enhancing GTFP contributes to energy savings and emission reduction, which is also confirmed by Wang et al. [
42]. Unlike the existing literature, this paper subdivides the effect under different divisions of labor positions. The study finds that firms with a higher import upstream degree will weaken the emission-reduction effect of GTFP. This is because the presence of importing firms with a higher upstream degree implies that most of the imported factors of production are primary products. These products contain limited technological information, rendering it difficult to realize the “technological learning effect” of imports, as well as being dependent on the strategic intentions of the GVC leaders, and being less effective in reducing emissions [
43].
Furthermore, this paper is the first to examine the dynamics of the value chain location’s effect on environmental performance through a timeseries regression. The results show that since China’s accession to the WTO in 2001, the gap between the advantages and disadvantages of the trade division of labor has been widening. Firms with higher import upstream are captured by the chain “leaders” at the lower end of the value chain for a long time and their environmental performance deteriorates, which is consistent with previous studies [
44]. In contrast to the existing literature, this paper further finds that firms with higher export upstreamness and net upstreamness continue to improve their GTFP by improving their strategic management capabilities and reverse development capabilities, thus contributing to the continuous improvement of environmental performance, which also explains the opposite performance results of the “pollution paradise effect” in different scenarios [
45], which implies that firms need to consider the possibility of extending themselves into low-energy production while undertaking polluting industries.
Finally, in order to address the negative impact of import upstreamness on environmental performance, this paper finds that external environmental regulation and internal technology-absorption capacity are conducive to improving firms’ environmental performance, which also confirms the significant correlation between GVC, technological progress, and environmental pollution [
42,
46], while demonstrating that environmental regulation not only affects the GVC division-of-labor position [
47], but also creates a push-back mechanism for firms to save energy and reduce emissions.
7. Conclusions with Policy Implications
With the deepening of economic globalization, the international division of production has changed from the intra-regional division of labor to the global division of labor. This has not only changed the world trade pattern but also renders the problem of pollution emissions arising from the production process more and more complicated. The research sample was selected as Chinese industrial enterprises, and the position of the enterprise value chain was measured from two perspectives: at home and abroad. Based on the clarification of the theoretical mechanisms, our study, for the first time, conducted an empirical study on the impact mechanisms and effects of different positions of GVC on the environmental performance of enterprises from both domestic and international perspectives. The following main conclusions are drawn.
First, based on the analysis of the theoretical mechanisms by which GVC position affects firms’ environmental performance, an empirical test was conducted to confirm the role of firms’ green total factor productivity. Specifically, for enterprises with higher upstreamness of import, it is more difficult to achieve green productivity improvement and corporate environmental performance under the low-end capture effect and unfavorable endogenous growth environment; enterprises with higher upstreamness of export enhance corporate green productivity by taking social responsibility to pursue a good reputation for protecting the environment. Enterprises with higher net upstreamness emit less pollution. The net upstreamness reflects the production linkage of enterprises’ layout in the country. The results showed that enterprises mostly enhance their production efficiency by expanding to the upstream linkage, thus improving their environmental performance. Hence, policy makers should consider the differences in the domestic and foreign production status of enterprises, and optimize the allocation of internal and external production links by adjusting import incentives. They should also encourage enterprises to export more intermediate products to enhance production efficiency and lower pollution emissions.
Second, the heterogeneity analysis found that the environmental performance of domestic firms is influenced to a significant extent by the domestic production layout. In contrast, the environmental performance of firms abroad is more affected by the foreign production layout. The impact of GVC position on the environmental performance of firms is more influenced by general trading firms. The central region is more influenced by GVC position. It has more incentive to achieve corporate environmental performance improvement by adjusting firms’ participation in domestic and foreign production links. The development of environmental policies needs to take into account differences in the level of regional development and the nature of enterprises. For foreign-funded enterprises, the main focus is to improve the control of exports and enhance the ability to capture and absorb the technology of imported intermediate products. For domestic enterprises, the main focus is on learning improvement in domestic industry chain expansion. Actively improving the value chain position of general trade enterprises will bring significantly better environmental performance improvement than processing trade enterprises. One must be wary of the value-chain pollution-transfer effect brought about by regions with a lower degree of openness to foreign trade.
Furthermore, the results of the dynamic analysis showed that as China continues to deepen the domestic and foreign production division of labor cooperation and improve enterprise technology, the inhibitory effect of emission reduction brought about by higher upstreamness of enterprise imports tends to decrease, while the emission-reduction effect of upstreamness of exports and net upstreamness shows a gradually increasing trend.
Finally, to solve the pollution-management dilemma, we further found that external industry regulation and internal improvement of enterprises’ technology absorption capacity will weaken the negative impact of the upstreamness of import on corporate environmental performance and enhance the emission-reduction effect of the upstreamness of export and net upstreamness. From the government’s perspective, industry environmental regulations can force enterprises to improve their environmental performance and reduce the risk of pollution transfer; from the enterprise’s perspective, by encouraging enterprises to invest in R&D and technological innovation to improve their endogenous growth capacity, and by expanding production links to high value-added links such as R&D and design, enterprises can develop in the direction of good environmental performance.