Abstract: In the era of economic globalization, seeking industrial upgrading and economic growth by embedding in the global value chain has become a common choice for developing countries. But the paradox is that these countries have a tendency to be locked in the lower end of the global value chain. This article first combs through the literature, analyzes the factors affecting the upgrade of global value chain from five aspects of technology gap, rules and standards, national strategy, international politics, and industrial innovation, and then summarizes the reasons for the formation of the paradox of global value chain development. On this basis, it is further proposed that the basic idea of resolving the paradox is to develop the dynamic comparative advantages of domestic demand, enhance the self-reliant technological innovation ability, and promote the function upgrade and chain upgrade of the global value chain in the network embedded mode. The organization of this network embedding model is manifested as: local enterprises are embedded in the spider-shaped production process, and industrial clusters relying on specialized markets form a bilateral platform, which strengthens the advantages of competition and cooperation among enterprises within the cluster, thereby promoting the global value chain. At the same time, local companies are embedded in the serpentine production process, emphasizing their independent innovation capabilities, brand market capabilities, and coordination capabilities with contract manufacturers, etc., so as to develop into a leading enterprise at the top of the global value chain pyramid and promote the upgrade of the global value chain. Future research should pay more attention to the governance structure between participants, the coordination mechanism based on rent distribution, the economic effect of innovative resource agglomeration and other important issues in the process of global value chain upgrading driven by domestic demand market.
