Table 9: Ownership Propensity: Vertical Integration in GVCs and Input Specificity

|1(Number of Firm-to-Firm Connections (_CF _<sup>_rs_</sup><br>_ij,t_<sup>))</sup>|PTA|Total depth|Core depth|WTO-X depth|
|---|---|---|---|---|
|Backward<sup>_rs_</sup><br>_j_ <sup>(</sup><sup>_ars_</sup><br>_j,t_|0_._022<sup>_∗∗∗_</sup><br>(0_._006)|0_._025<sup>_∗∗∗_</sup><br>(0_._006)|0_._023<sup>_∗∗∗_</sup><br>(0_._006)|0_._026<sup>_∗∗∗_</sup><br>(0_._006)|
|Forward<sup>_rs_</sup><br>_j_ <sup>(</sup><sup>_brs_</sup><br>_j,t_<sup>)</sup>|_−_0_._006|_−_0_._003|_−_0_._003|_−_0_._005|
||(0_._007)|(0_._007)|(0_._007)|(0_._007)|
|Specifcity afliate _×_ intput coefcient|_−_0_._058<sup>_∗∗∗_</sup>|_−_0_._086<sup>_∗∗∗_</sup>|_−_0_._078<sup>_∗∗∗_</sup>|_−_0_._081<sup>_∗∗∗_</sup>|
||(0_._011)|(0_._011)|(0_._011)|(0_._011)|
|Specifcity parent _×_ output coefcient|0_._079<sup>_∗∗∗_</sup>|0_._064<sup>_∗∗∗_</sup>|0_._066<sup>_∗∗∗_</sup>|0_._073<sup>_∗∗∗_</sup>|
||(0_._013)|(0_._013)|(0_._013)|(0_._013)|
|PTA-Measures_ij,t_|_−_0_._018<sup>_∗∗∗_</sup>|_−_0_._043<sup>_∗∗∗_</sup>|_−_0_._027<sup>_∗∗∗_</sup>|_−_0_._052<sup>_∗∗∗_</sup>|
||(0_._000)|(0_._001)|(0_._000)|(0_._001)|
|PTA-Measures_ij,t ×_ Backward<sup>_rs_</sup><br>_j_|_−_0_._002|0_._026|0_._010|0_._035<sup>_∗_</sup>|
||(0_._008)|(0_._016)|(0_._011)|(0_._020)|
|PTA-Measures_ij,t ×_ Forward<sup>_rs_</sup><br>_j_|_−_0_._022<sup>_∗∗_</sup>|_−_0_._084<sup>_∗∗∗_</sup>|_−_0_._058<sup>_∗∗∗_</sup>|_−_0_._091<sup>_∗∗∗_</sup>|
||(0_._009)|(0_._018)|(0_._012)|(0_._022)|
|PTA-Measures_ij,t ×_ Input specifcity afliate<sup>_r_</sup>|0_._008<sup>_∗∗∗_</sup>|0_._021<sup>_∗∗∗_</sup>|0_._012<sup>_∗∗∗_</sup>|0_._027<sup>_∗∗∗_</sup>|
||(0_._000)|(0_._001)|(0_._000)|(0_._001)|
|PTA-Measures_ij,t ×_ Inputspecifcity parent<sup>_s_</sup>|0_._017<sup>_∗∗∗_</sup>|0_._040<sup>_∗∗∗_</sup>|0_._026<sup>_∗∗∗_</sup>|0_._048<sup>_∗∗∗_</sup>|
||(0_._000)|(0_._001)|(0_._001)|(0_._001)|
|PTA-Measures_ij,t ×_ Input specifcity afliate<sup>_r _</sup>_×_ Backward<sup>_rs_</sup><br>_j_|0_._232<sup>_∗∗∗_</sup>|0_._489<sup>_∗∗∗_</sup>|0_._338<sup>_∗∗∗_</sup>|0_._574<sup>_∗∗∗_</sup>|
||(0_._016)|(0_._033)|(0_._022)|(0_._040)|
|PTA-Measures_ij,t ×_ Input specifcity parent<sup>_s _</sup>_×_ Forward<sup>_rs_</sup><br>_j_|0_._205<sup>_∗∗∗_</sup>|0_._556<sup>_∗∗∗_</sup>|0_._369<sup>_∗∗∗_</sup>|0_._651<sup>_∗∗∗_</sup>|
||(0_._018)|(0_._037)|(0_._024)|(0_._045)|
|BIT_ij,t_|_−_0_._001<sup>_∗∗∗_</sup>|_−_0_._001<sup>_∗∗∗_</sup>|_−_0_._001<sup>_∗∗∗_</sup>|_−_0_._001<sup>_∗∗∗_</sup>|
||(0_._000)|(0_._000)|(0_._000)|(0_._000)|
|Country-pair FE|✓|✓|✓|✓|
|Industry-pair FE|✓|✓|✓|✓|
|Shareholdert-country-industry-year FE|✓|✓|✓|✓|
|Subsidiary-country-industry-year FE|✓|✓|✓|✓|
|Domestic-year FE|✓|✓|✓|✓|
|Obs.|111,505,680|111,505,680|111,505,680|111,505,680|
|R<sup>2</sup>|0.194|0.195|0.195|0.195|

Standard errors are clustered at country-industry pairs level and reported in parentheses. * _p <_ 0 _._ 1, ** _p <_ 0 _._ 05, *** _p <_ 0 _._ 01 the value chain.

Overall, we find a positive effect of PTAs (and their depth) on firm foreign ownership both for the frequency as well as the propensity of any ownership. Moreover, for the downstream, ownership frequency is increased by more than the upstream one. On the other hand, the propensity of there being any upstream ownership at all increases by more with PTAs than the propensity of any downstream ownership does.

A second set of results is related to the direction of integration within GVCs. More concretely, after combining our ownership data with input-output coefficients from input-output tables, we are able to differentiate between horizontal and vertical and, for the latter, between forward versus backward investment. Regarding positive ownership links, we only find a mild positive effect of PTAs on horizontal and vertical forward integration. The strongest effects materialize for the propensity of any ownership. At this margin, we find a clear negative impact of PTAs on horizontal integration and a positive effect on vertical integration in both the forward and backward directions.

Finally, we shed light on the role of the specificity of inputs in conjunction with PTA membership for vertical integration. We find that a higher input specificity 16