Production, Territories and Structural Change
Edited by Patrizio Bianchi, Clemente R. Durán and Sandrine Labory
Chapter 2: The “lightness” of Industry 4.0 lead firms: implications for global value chains
Global value chains have undergone several changes in the post-Cold War period, including most recently, digitization. Digitization, due in large part to the suite of technologies commonly referred to as “Industry 4.0” or the “Fourth Industrial Revolution,” is changing the frontier of what tasks can be performed by machines and what must be completed by humans, challenging the extensiveness of production in geographic space and the density of interactions among buyers and suppliers. In this chapter, the authors argue that technological change is introducing new, highly capable digital technology multinational enterprises (“digital economy MNEs”) into the manufacturing and service sector. These firms are unique in that they value non-physical assets higher than physical assets, indicative of a competitive strategy valuing more asset-light forms of international production. “Lightness” among these firms has development implications for regions, especially if lightness among digital economy MNEs is a harbinger of increased lightness among all industries. To develop this argument, the discussion is organized as follows. First, the chapter reviews the rise and recent dynamics in glogal value chains (GVCs). Next, it defines the suite of technologies making up Industry 4.0 and allied concepts. It also discusses the characteristics of digital economy MNEs, the lead firms in the digital economy, focusing on “lightness” as a unique characteristic of these firms that is enabled by Industry 4.0 technological change. The chapter then explores the implications of light lead firms on GVCs, exploring three scenarios about the impact of more asset-light forms of international production and emerging alternative modes of industrial governance. It concludes with a summary of points made in the chapter, and areas for future research.
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