Factors That Affect the Technological Transition of Firms Toward the Industry 4.0 Technologies

Abstract

This research identifies factors that affect the technological transition of firms toward industry 4.0 (IT) technologies focusing on capabilities and policy impacts using relatedness and complexity measures. For the analysis, a unique dataset was used of Korean manufacturing firms' patents and their financial and market information. Following the Principle of Relatedness, which is a recently shaped empirical principle in the field of economic complexity, economic geography, and regional studies, a technology space is built, and each firm's footprint in the space is traced. Using the firms' technology space can identify those firms that successfully develop new I4 technologies and can examine whether their accumulated capabilities in their previous technology domains positively affect their technological diversification and which factors play a critical role in their transition towards I4. In addition, combining data on whether the firms received government support for R&D activities can help further analyze the role of government policy in supporting firms' knowledge activities in new I4 technologies. Firms with higher related technologies and more government support are more likely to engage in new I4 technologies. This research is expected to inform policymakers who intend to diversify firms' technological capabilities towards I4 technologies.

Technological Leadership in Industry 4.0: A Comparison Between Manufacturing and ICT Sectors Among Korean Firms

“…Column (1) and (2) depict the results of the logistic model, which estimate the effect of structural factors of technology on the emergence of new I4 technology in a firm and ask whether there exists a difference in the effects between the manufacturing and the ICT sector. Our analysis confirms the findings of Kim et al [43], [44] that the density of related technologies, w i,k , has a positive and significant effect on the firm's probability of success in entering a new I4 technology. Moreover, we find that this effect is stronger in the ICT sector than in the manufacturing sector.…”

“…To examine the level of path-dependency of firms in their technological diversification [43], [44], we further calculate the density and check whether its effect is similar between the manufacturing and the ICT sectors by using the proximity ψ k,l . The density of related technology of a firm at time t is given by…”

“…In addition, we use the relatedness measure to trace the different technological trajectories of innovation between the two sectors [32]- [34]. The metric of relatedness measure the overall affinity between a specific activity, such as producing products [32], [35], developing industries [36]- [40], or acquiring technologies [41]- [44], and predicts the future trajectories of them. Since relatedness metrics explain path dependencies and help to predict which activities will grow and decline in countries, regions, or firms, we can explore the direction of technological trajectories and the level of pathdependencies of the two sectors.…”