In the 1990s, Malaysia, along with other East Asian countries, achieved rapid economic growth rates. Research has yet to ascertain the extent to which this rapid economic growth was due to the development of global production networks. The main objective of the paper is to examine the impact of international production fragmentation on productivity growth. The paper hypothesises that international production fragmentation increases productivity growth through trade and foreign direct investment, and that productivity growth increases due to skill‐intensive industries producing within an international production network.