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Comments on
Driving Small and Medium-Sized Enterprise
Participation in Global Value Chains: The
Role of Financial Constraints
Cassey Lee
Feb 2020
Brief Summary of Paper
• Role of financial constraints in the participation of Indian SMES in GVC
• Unbalanced panel of 888 SMEs from Indian manufacturing covering
the period 2006-2016
• Literature review (Introduction)
• Good overview of SMEs (GVC and non-GVC) in India
• Probit, IV-Probit & Heckprobit estimations of determinants of GVC
participation
• Financial constraints (leverage, liquidity & WWI) limit participation of
SMEs in GVCs
• Overall, a well-written paper which adds to the literature
 Comments
• Nature of data
• Sampling representativeness of SMEs –
888 vs 336,000 (0.26%)?
• Sharp increase in the number of GVC and
Non-GVC SMEs in 2012 – due to sampling
or data cleaning? Or Change in
government policy?
• Over-sample of exporters?
Comments
• Definition of GVC (1,0) – both import (1,0) & export (1,0)
• More stringent definition possible?
• Higher threshold ?  need to re-look literature e.g. linking import-export
threshold with other measures of GVCs
• Any data of import-export destinations?
• Perhaps cross-check (Table 2) with industry-level measures of GVC
participation
• Might be useful to think about linkages between large firms and SMEs
within industry – SMEs might source inputs from large importers and sell to
large exporting firms [indirect link to SMEs]
• Interactive variable might yield interesting findings
• Sub-sample regressions – firm size categories (S,M,L), industry, location
(state effects)
Comments
• Correlation between explanatory variables – size, foreign, TFP
• Section 4 (Stylized Facts) can be shifted forward and merged with
Section 2 (Institutional Background) – SMEs and SME Policies in India
• Policy discussions – it might be useful to take stock of current
government policies – especially those related to finance – and
discuss how useful these are for SMEs to participate in GVCs – based
on your empirical analyses (also, how explicit is this a goal)
• Industry-specific policy issues might be important – this may depend
on industry-level differences and may be location-specific (state-
driven policies for specific industries)