The Central Statistics Office (CSO) has today issued results on Global Value Chain (GVC) participation for the year 2020. This is the second publication from the GVC survey following the results on International Sourcing. In a highly globalised economy, enterprises increasingly organise the production process into smaller activities located across different countries to bring goods and services to market. The results of this publication provide users with relevant statistical information on these GVC arrangements.
The Global Value Chains (GVC) Survey’s overall objective is to monitor enterprises’ economic globalisation by developing and providing indicators and statistical evidence. In a highly globalised economy, enterprises increasingly organise the production process into smaller activities located across different countries to bring goods and services to market. International sourcing of business functions is a key feature of GVCs as businesses in Ireland globalise their production process. These indicators can provide policymakers, researchers and other users with relevant statistical information about the level, patterns and possible impacts of these globalised production processes on the Irish business economy.
The GVC survey (previously known as International Sourcing Survey) is a triennial survey with the most recent iteration covering the period between 2018 to 2020. The survey was issued to enterprises in August 2021 and closed in December 2021.
The survey was collected via an online questionnaire. The survey started with questions on business functions distribution in the enterprise. It also included questions on global value chains activities and international sourcing of business functions, including questions about motivations for and barriers against international sourcing. Finally, there was a set of questions to help measure the impact of COVID-19 and Brexit on international sourcing and GVC arrangements.
The questionnaire contains the following modules and themes:
Module 1: Persons employed by business function – contains only questions on the distribution of persons engaged per business functions in the enterprise’s structure.
Module 2: GVC arrangements – focuses on the purchasing and supplying aspects of international trade in goods and services and tries to measure the GVC trade and some of its characteristics.
Module 3: International Sourcing - contains questions that help measure international sourcing within and outside of the enterprise group, business functions being internationally sourced, locations of international sourcing and the jobs lost or created as a result of international sourcing activity, per business function.
Module 4: Motivation and barriers for international sourcing - focuses on two key aspects: 1) why are enterprises motivated to internationally source and 2) what are the barriers encountered that stop them from sourcing or make it more difficult.
Module 5: Covid-19 and Brexit impact on economic globalisation - temporary module that tests the GVC resilience to Covid-19 and Brexit related events.
All enterprises with 50 or more persons engaged operating in NACE Rev. 2 sectors B-N were included in the survey. More than 4,000 enterprises were surveyed and the response rate to the survey was 47.5%. Returned survey forms were verified and edited before the data was weighted up to the frame population.
To counteract potential bias and make the final distribution representative of the population the following process was developed. First, stepwise logistic regression was conducted to generate a response propensity score. This was based on the following characteristics:
From this, non-response adjustments were calculated and applied to each respondent. These non-response adjustments where then calibrated using CALMAR to ensure the totals matched to the key characteristics of NACE and size class of the survey population on the Business Register.
The survey was collected from enterprises under the Statistics (Global Value Chains) Order 2021 (S.I. No. 166/2021) made under the Statistics Act 1993.
The information collected in the survey is confidential under the Statistics Act and will only be used by the CSO for the compilation of aggregate statistics. The CSO has checked the statistical outputs of the survey to ensure that tables do not disclose details of any individual or company. In general, this means that the results do not include multi-variate cross-classifications.
For more information on the methodology for International Sourcing statistics see the methods page. The CSO wishes to thank all the companies that took part in the Global Value Chains Survey.
Goods and materials: A good or material refers to all movable property.
Services: Service results form a production activity that changes the conditions of the consuming units (transformation services) or facilitates the exchange of products or financial assets (margin services). Services are often difficult to separate from goods with which they may be associated in varying degrees.
Global Value Chains (GVC): GVCs comprise a full range of cross-border activities required to bring a product or service from conception through the different phases of production and delivery to final consumers.
GVC trade: It refers to an international trade that takes place in a GVC. Most commonly, this includes trade in intermediate goods and services.
COVID-19 events: These events resulted directly from the COVID-19 outbreak, hampering or enabling an enterprise’s business activity. Examples are government lockdowns, shutting down of sales points, and positive events such as increased sales of protection masks.
Brexit events: These events resulted from the increased trade friction from the United Kingdom’s departure from the European Union.
Business Function
Business functions are generally divided into two main categories: core business functions and support business functions. Eights types of business functions (including other functions) are used in the survey. The list of business functions used in the survey are listed below:
The main business functions distinction is between core and support functions.
The core business function represents the revenue-producing activity of the enterprise. In most cases, it will be consistent with the enterprise’s main activity as classified by the main activity code entered in the business register. A core business function denotes a set of tasks that produce goods and services intended for the market. A core function may span several activities and include related vertical activities (e.g., production of inputs). While enterprises incur costs from carrying out core business functions, these functions’ outputs can also be directly associated with turnover. An enterprise may have one or more core functions. Typically, the core business function corresponds to the enterprise's main and secondary activity.
Support business functions are carried out to permit or facilitate the production of goods or services. They do not directly generate turnover, only costs. However, the cost, efficiency, and quality of support functions, especially management, marketing, logistics, R&D and other innovation-related activities, can make essential contributions to enterprises’ competitiveness. Support business functions do not correspond to the main or secondary activities of an enterprise (secondary activities correspond to core business functions) but generally, they correspond to ancillary activities.
In the context of this survey, sourcing refers to the total or partial movement of business functions by an enterprise to another enterprise. This term relates to the well-known term outsourcing (sourcing outside of the enterprise group) and the less known term insourcing (sourcing within the enterprise group). It is important to note that prior to being sourced in the reference period, these functions were performed in the enterprise (the statistical unit enterprise). On the other hand, if an enterprise has been purchasing a business function (e.g., as a purchase of services) since its creation, then there is no sourcing involved.
Expansion domestically or abroad is not considered sourcing. The reason is that the enterprise either never performed the business function or the enterprise purchased additional services that they already perform in-house. Thus, there is no movement of jobs to or from the business function. A typical example of expansion is a new production line set-up without moving the business functions and without reducing activity or jobs in the concerned enterprise. In the GVC Survey 2021, if the enterprise reports international sourcing but does not report a loss of jobs, this could indicate an expansion instead of international sourcing.
The definition of subcontracting as present in the literature and statistics varies depending on the topic and context. Most literature that compares outsourcing and subcontracting notes that the main difference between them is as follows. The outsourcing enterprise must have had the outsourced business function performed in-house at a point in the past. On the other hand, subcontracting relates to purchasing of a product regardless of whether the product was previously produced in-house or not. Subcontracting must not be a one-off purchase of a product. In the context of the publication subcontracting can be understood as either expansion or outsourcing.
There are four basic sourcing options: 1) internal domestic sourcing from within the enterprise or enterprise group, and 2) external domestic sourcing from independent (non-affiliate) suppliers; and two international options: 3) internal international sourcing from within the enterprise group (i.e., foreign affiliates), and 4) external international sourcing from independent suppliers.
| Four sourcing options for business functions | |
|---|---|
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Domestic Outsourcing Business function is moved to an enterprise:
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International Outsourcing Business function is moved to an enterprise:
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Domestic Insourcing Business function is moved to an enterprise:
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International Insourcing Business function is moved to an enterprise:
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The four options are possible, in theory, for any business function, and enterprises can source various functions differently and simultaneously. International sourcing includes international outsourcing and international insourcing, while domestic sourcing included domestic outsourcing and domestic insourcing.
An enterprise group is an association of enterprises bound together by legal and/or financial links. A group of enterprises can have more than one decision-making centre, especially for policy on production, sales and profits. It may centralise certain aspects of financial management and taxation. It constitutes an economic entity which is empowered to make choices, particularly concerning the units which it comprises.’ (Source: Council Regulation (EEC) No 696/93.). Details on the identification of the Enterprise group is provided in the EBS manual.
The following geographical breakdown will be used in the survey:
The NACE Rev 2 sections (NACE is the EU classification of Economic Activity):
Section B: Mining and quarrying
Section C: Manufacturing
Section D: Electricity, gas, steam and air conditioning supply
Section E: Water supply; sewerage, waste management and remediation activities
Section F: Construction
Section G: Wholesale and retail trade; Repair of motor vehicles and motorcycles
Section H: Transportation and storage
Section I: Accommodation and food service activities
Section J: Information and communication
Section K: Financial and insurance activities
Section L: Real estate activities
Section M: Professional, scientific and technical activities
Section N: Administrative and support service activities
NACE sections O (Public administration and Defence), P (Education), Q (Human Health and social work activities), R (Arts, entertainment and recreation), S (Other service activities) were not included in the survey.
The results in the publication are grouped as follows:
| NACE Rev. 2 groupings | NACE Rev. 2 Codes |
|---|---|
| Industry | B - E |
| Other Industrial | B, D, E |
| Business Services | G - N |
| Services | H - N |
| Other services | I, L, M |
| High-tech manufacturing | C21, C26, C303 |
| Medium-high tech manufacturing |
C20, C254, C27, C28, C29, C30 (excl. C301 & C303), C325 |
| Medium-low tech manufacturing |
C182, C19, C22, C23, C24, C25 (excl. C254), C301, C33 |
| Low tech manufacturing |
C10-C17, C181, C31, C32 (excl. C325) |
Further information is available about Classifications.
