Trends in Global Value Chains

3. Key trends in multinational production

A complete assessment of global value chains requires looking beyond trade flows alone. International production networks are not only organised through arm’s-length transactions between firms located in different countries; they are also shaped by MNEs that establish affiliates abroad, source inputs across borders, transfer technology and intangible assets within firm networks, and combine local production with international sales. This is particularly important in the post-pandemic period. While discussions on supply chain resilience often focus on trade disruptions, transport bottlenecks or the sourcing of critical inputs, multinational production (i.e. the production of firms outside of their country of origin) provides an additional channel through which firms manage risks, diversify locations, maintain market access and reorganise production in response to shocks.

The OECD Analytical AMNE database is designed to capture this dimension of globalisation. It extends the OECD ICIO framework by introducing an ownership split between domestic-owned and foreign-owned firms, and, for some indicators, by distinguishing domestic MNEs from non-MNEs. This makes it possible to assess not only where value added is produced and traded, but also which type of firm is responsible for production, exports, imports of intermediates and value creation (Cadestin et al., 2018[5]).

Multinational production is comparable in scale to world trade

Multinational production is a major channel of international integration in its own right. Figure 3.1 shows the evolution of the world gross output of foreign affiliates between 2000 and 2023 (multinational production), compared with world trade in goods and services. There is an overlap between the two that corresponds to exports of foreign affiliates (about 28% of the production of foreign affiliates is exported, while the rest goes to domestic sales in the host economy). In 2023, the gross output of foreign affiliates reached about USD 25.6 trillion (including the overlap with trade), equivalent to 25% of world GDP. This is a bit lower but comparable with world trade in goods and services (estimated at USD 26.6 trillion in the TiVA framework). This comparison highlights that foreign affiliate production is not a secondary channel of internationalisation. It is a major form of global economic integration, comparable in magnitude to international trade. Together, world trade and production of foreign affiliates account for 45% of global GDP (removing the overlap between the two).

The post-pandemic period shows both the resilience and the cyclical sensitivity of multinational production. The gross output of foreign affiliates (in nominal terms) fell from USD 20.2 trillion in 2019 to USD 18.8 trillion in 2020, reflecting the contraction in global activity during the COVID-19 shock. It then recovered rapidly, reaching USD 21.9 trillion in 2021 and USD 25.0 trillion in 2022. This rebound suggests that multinational production remained an important channel of global integration after the pandemic, even as firms and governments reassessed risks linked to supply chain concentration, geopolitical tensions and strategic dependencies.

 

Multinational enterprises are disproportionately important in trade

While multinational production measures the activities of MNEs through their foreign affiliates, MNEs also produce in their domestic economy. Figure 3.2 compares the contribution of foreign affiliates, domestic MNEs and non-MNEs to world gross output, exports and imports of intermediate inputs in 2023. The results show that MNEs are much more important in trade than in production. Foreign affiliates account for about 12.3% of world gross output, but for 26.6% of world exports and 23.8% of imports of intermediate inputs. Domestic MNEs show a similar pattern: they account for 23.1% of gross output, but for 33.4% of exports and 29.1% of intermediate imports.

Taken together, foreign affiliates and domestic MNEs account for about one-third of world output, but more than half of world exports. By contrast, non-MNEs account for 64.5% of gross output, but only 40.0% of exports. This confirms the central role of MNEs in international trade and GVC participation. MNEs are not only large producers; they are disproportionately involved in cross-border transactions, both as exporters and as importers of intermediate inputs.

The location and ownership of foreign affiliate production remain unevenly distributed

The Analytical AMNE database provides a unique lens through which to examine the global footprint of MNEs, enabling the decomposing of world output according to both where foreign affiliates operate and who owns them. Figure 3.3 draws on this framework to present, for 2023, the share of world foreign affiliate output accounted for by the largest host economies (inward) and the largest ownership economies (outward). Together, the two panels reveal the geography of MNE activity across the global economy and highlight the degree to which the ownership and location of international production remain concentrated among a small number of economies.

The United States stands out as a pivotal economy in both dimensions, hosting 17% of world foreign affiliate output while accounting for 23.2% of world outward ownership — the largest shares in both panels by a significant margin. An asymmetry between inward and outward positions is also observed across major European economies. Germany, France, the Netherlands, and Switzerland each record outward ownership shares that exceed their inward host shares, reflecting the global reach of their MNE sectors relative to the foreign affiliate activity they attract domestically. In turn, China presents a contrasting profile: as the world's second-largest host economy with 14.4% of inward foreign affiliate output, it remains a structurally important destination for international production, yet its world outward ownership share of 3.8% is considerably smaller, reflecting decades of inward FDI-led growth.

The OECD and non-OECD breakdown also reveals interesting patterns. On the inward side, non-OECD economies — led by China, Brazil, and a broad range of emerging markets — account for a substantial portion of world foreign affiliate output, reflecting their integration into global production as important host locations. On the outward side, however, non-OECD economies are much less present, with China remaining the only significant exception. This structural asymmetry underscores a trend in trade-based development strategies: while many non-OECD economies have succeeded in attracting FDI and embedding themselves in international production networks, the ownership of that production remains concentrated in OECD headquarter economies.

 

Figure 3.4 further shows the distribution of foreign affiliate production according to the location of parent firms and host economies in 2011 and 2023. The results indicate that, while foreign affiliate activity remains strongly anchored in OECD economies, its geography has become more diversified over time.

In 2023, foreign affiliates with an OECD parent operating in an OECD host economy generated about 60.9% of global foreign affiliate output. When including the activity of affiliates with an OECD parent in non-OECD host economies, OECD-based MNEs accounted for nearly 85% of total foreign affiliate output worldwide.

However, this share has declined over time, pointing to the growing importance of non-OECD markets, both as host economies and as sources of MNEs. The share of affiliates with non-OECD parents operating in non-OECD host economies increased significantly, from 4.9% in 2011 to 9.3% in 2023. This is a notable development. A growing share of foreign affiliate production now reflects investment by non-OECD multinationals, including within non-OECD regions. The share of non-OECD parent firms operating in OECD host economies increased more modestly, from 3.8% to 5.0%.

Foreign-owned firms are more internationally embedded than domestic-owned firms

Ownership-based ICIO tables also show how foreign-owned and domestic-owned firms differ in their production structures and sales destinations. Figure 3.5 decomposes production and sales by ownership, comparing domestic-owned and foreign-owned firms. The first part of the chart shows the VA content of gross output. The second part decomposes sales according to whether output is sold domestically or exported, and whether it is used for final demand or as an intermediate input by domestic-owned or foreign-owned firms.

The VA decomposition shows that foreign-owned firms rely more heavily on foreign VA than domestic-owned firms. For domestic-owned firms, own VA accounts for about 49.6% of gross output in 2023, while foreign VA accounts for around 10.9% coming from imported intermediate inputs produced by domestic-owned and foreign-owned firms abroad. For foreign-owned firms, own VA is lower, at 39.4%, while foreign VA is higher, at about 21.6% of gross output (coming from imported intermediate inputs produced by domestic-owned and foreign-owned firms abroad).

Foreign-owned firms also draw substantially on domestic VA. Domestic VA from domestic-owned firms accounts for about 33.2% of their gross output, while domestic VA from other foreign-owned firms accounts for 5.7%. This confirms that foreign affiliates are not isolated enclaves. They combine foreign inputs with domestic suppliers and their own production activities. The contribution of domestic suppliers to foreign-owned firms is important for host economies, because it indicates potential spillovers and linkages between foreign affiliates and local production systems.

 

The sales decomposition reinforces this point. Domestic-owned firms sell a larger share of output to domestic final demand: 45.3% of their sales, compared with 28.7% for foreign-owned firms. Foreign-owned firms, by contrast, are more export-oriented. Exports account for 27.6% of their sales when exports for final consumption and intermediate use are combined, compared with 10.7% for domestic-owned firms. This is consistent with the evidence in Figure 3.2 showing that multinational enterprises account for a disproportionately large share of exports.

Foreign-owned firms are also more involved in intermediate transactions. A sizeable share of their sales is directed to intermediate consumption by domestic-owned firms and other foreign-owned firms, both domestically and abroad. This indicates that foreign affiliates occupy important positions within production networks, supplying inputs to other firms rather than only selling final products.

Foreign affiliates matter most in manufacturing and selected services

The ownership-based ICIO tables can also provide further insights at the industry level. Figure 3.6 decomposes the VA embodied in final demand across OECD economies by industry and by origin of ownership. It distinguishes three components: VA generated by domestic-owned firms operating in the domestic economy, VA generated by foreign-owned firms established domestically, and VA sourced from abroad. This decomposition extends standard TiVA analysis by separating the contribution of foreign affiliates operating within the domestic economy from foreign VA embodied through cross-border supply chains.

Across the OECD as a whole, domestic-owned VA accounts for the large majority of final demand, with the foreign-owned domestic component and cross-border foreign VA each representing comparatively modest shares. This aggregate picture, however, conceals substantial sectoral heterogeneity. In manufacturing, the foreign-owned domestic component is markedly more prominent than in services. Within manufacturing, transport equipment, machinery and equipment, and chemicals and pharmaceuticals display particularly elevated combined foreign shares. Mining stands apart with a high foreign-owned domestic share, pointing to the significant role of foreign capital in natural resource extraction.

Across most services activities, domestic-owned VA is overwhelmingly dominant. Nevertheless, this is mainly due to lower shares of foreign VA, which reveals a stronger relative importance of commercial presence (foreign-owned VA) compared to cross-border trade (foreign VA). In this context, the sector of finance and insurance stands out, presenting the highest share of foreign-owned VA across all reported OECD services sectors.