Can AI help emerging economy hidden champions climb upstream in GVCs? Evidence from Chinese listed hidden champions

Purpose Hidden champions are key actors in leading emerging economy firms to break free from the low-end lock-in problem within global value chains (GVCs). This study aims to analyse how hidden champions leverage artificial intelligence (AI) to achieve leapfrog upgrading in GVCs. Design/methodology/approach This study designs a two-way fixed effects model to examine how AI technology adoption affects the GVC upgrading of hidden champions by using a data set of 8,689 firm–year observations from 1,204 Chinese A-share listed hidden champions between 2013 and 2023. The sample data are derived from the annual financial data of firms and the text mining analysis of annual reports. Findings Results indicate that AI adoption enhances the positions of hidden champions in GVCs. In particular, this enhancement is mediated through the increasing specialisation and production efficiency of hidden champions and their domestic industry peers. Moreover, the effect of AI adoption on GVC upgrading is more pronounced for hidden champions with higher levels of automation. Hidden champions in labour-intensive and technology-intensive industries gain greater benefits from AI adoption in terms of GVC upgrading. The positive effect is particularly salient for hidden champions located in cities with high computing power capacity. Originality/value This study proposes a novel concept of domestic GVC leadership capability and extends discussions on the breakthroughs of emerging economy firms from low value-added activities by examining how Chinese hidden champions leverage AI to integrate accessible domestic supply chain resources for leapfrog GVC upgrading. The findings guide emerging economy firms in approaching the GVC upgrading ceiling to successfully climb the global GVC upgrading ladder. The discoveries also provide insights into how AI can enhance GVC resilience.