Finally, the bottom graph of Figure 1 shows the changes in domestic sourcing of MNEs. We first calculated the country average separately for each survey and then calculated the change in the average between the last two survey years for each country (standardized to represent the change over 5.8 years, the average time between two surveys). For almost two thirds of all countries, the intensity of domestic sourcing increased. The average increase of +3.5% across all countries tends to underscore the magnitude of the change. For a third of all countries (11 out of 34) the measure increased by more than 10%, while for only 2 countries it declined by more than 10%.

Given that there are on average 2.04 surveys per country, each country-year average is calculated using approximately 38 firm responses. It is no surprise then, that the standard deviation for the country-level changes is even higher than for the levels. Another reason for caution is that for some countries the annualized change is calculated for two years that are relatively close and then extrapolated for a 5.8 year period that is standardized over all countries. This is likely to raise the importance of measurement error.

The second GVC measure we have calculated is the fraction of inputs of domestic producers that is imported. As shown in the Appendix, the WBES in principle contains a question that allows one to distinguish between firms that sell finished or semi-finished goods mostly to final consumers and firms that sell intermediate inputs. Taglioni and Winkler (2014) propose to calculate this second GVC measure only for the subsample of producer firms, i.e. excluding suppliers. Unfortunately, in most surveys conducted in sub-Saharan countries this question was not posed to the firms. The harmonized dataset available on the WBES web site does not contain the responses to this question.

For comparability across countries and over time, we calculated the measure for all domestic firms, i.e. firms that report to be at least 90% private-owned by domestic owners, including both producers of final goods and supplier firms. It would make the results on indicator (2) for all domestic firms very close to one minus the results on indicator (1) for the set of firms that were reported in the dashed lines of Figure 1, already discussed above. To make the results more interesting, we show the results for the second indicator in Table 2 and Figure 2 only limited to the subset of small firms in the manufacturing sector. These are firms for which entering global value chains is likely to provide the greatest potential gains, but also pose non-trivial challenges.

Results in the third and fourth columns of Table 2 indicate that the average fraction of imported intermediate inputs across all countries is 22%. The fraction is higher in smaller countries as the unweighted average stands at 34%. Given that small firms in Africa are really quite small, employing on average only nine workers, even the weighted average is relatively high. Somewhat surprisingly, however, the fraction is not growing over time. For the average country, it even declined slightly by 3%. The variation across countries is 17%, which is exactly as large as for the first indicator. But given the lower absolute value of the mean, it implies greater variability.

Not surprisingly, the correlation between the first two GVC indicators is negative. Countries where MNEs source a lot domestically tend to be countries where small, domestic manufacturers import little. With a partial correlation statistic of -0.64 this relationship is surprisingly strong. The experience of MNEs and small domestic firms is thus remarkably 13