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Abstract: Amid rapid global economic development and deep restructuring of global value chains (GVCs), China's manufacturing sector confronts escalating challenges from rising labor costs, intensified international competition, and technological blockades imposed by developed countries in high-tech fields. This study investigates the driving effect of the domestic value-added ratio in exports (DVAR), which indicates the development of local value chains, on manufacturing enterprises' innovation capabilities through the theoretical lens of regulatory mechanisms, specifically focusing on human resource supply optimization and financing environment improvement as critical pathways While existing literature most focus on the effects of GVC participation on innovation or treats DVAR as a dependent variable, this research positions DVAR as an independent variable driving firm-level innovation. We hypothesize that local value chains enabled enterprises to accumulate greater innovation resources, with human resource supply and financing environment serving as crucial regulatory mechanisms. Employing fixed-effects models on Chinese manufacturing enterprise data, the empirical analysis demonstrates a significant positive correlation between local value chains and innovation capabilities., The enhancement effect is particularly pronounced in technology-intensive enterprises. Robustness tests confirm strong consistency across alternative model specifications, while heterogeneity analysis reveals significant variations across different industry types. Theoretically, this study supplements existing GVC and innovation literature by establishing a regulatory mechanism framework linking DVAR to innovation capabilities. Practically, it provides a strategic pathway for China's manufacturing sector to address external challenges and achieve high-quality development through enhanced domestic value capture. The findings inform policymakers to strengthen support for innovation development strategies and promote deeper collaboration between education and capital markets to facilitate manufacturing transformation and upgrading. Future research should explore synergistic effects across diverse regional development contexts to achieve comprehensive improvement in enterprise innovation capabilities.

Keywords: GVC, Innovation Capability, Manufacturing Industry, Human Capital, Finance