Regional selectivity of innovative progress: Industry 4.0 and digitization ahead
Ulrich Hilpert
ABSTRACT
Industry 4.0 and digitization are new transformations for regions and metropolises where technologies are applied but regionally can appear as a continuation of innovative processes where it is developed. The divergent presence of competences creates a selectivity process among regions. There are individual industry-location-nexuses formed out of competences of industries, labour force and research which are complemented by public policies providing support towards such adaptation of innovation and change. Regional societies formed from skilled and educated labour become an important basis for participation in innovation and supply chains. Since smart factories widely can be managed remotely, this also shows a concentration of decision making. Simultaneously, it forms a polycentric de-concentration, indicating some more important locations as central within the networks. These systematic changes continue to deepen over time. While public policies may match innovative opportunities at the appropriate moment, they also contribute to a continuation of uneven development and divergent societal tendencies. Industry 4.0 and digitization indicate a wide and selective change of organization associated with new technologies and innovation. While some regions and metropolises can continue to build both innovative competences and innovative societies based on innovative labour force, others will participate because of their position in supply chains.
New technologies raise different issues in different regional contexts. In some contexts, a technological advance may create great opportunities. In another, it may pose severe challenges. In a third, it may simply be inapplicable, and so be irrelevant. Sometimes, a region may adapt its existing economic and social situation to adopt a new technology, taking its opportunities and ameliorating its challenges. It may even need to do so using a variety of different approaches and strategies. Other regions may have the advantage of developing the new technologies (rather than just accommodating them), or maybe able to apply new technologies to develop new products. Finally, a strong research base may attract wholly new economic or industrial capabilities to a region, metropolis or location, which did not have them before. Thus, new technologies can be related to industrial restructuring, highly innovative processes or start-ups which engage in R&D but do not depend directly on manufacturing to add value and achieve economic success. In this respect, the discussion on Industry 4.0 and digitization is very different from previous processes of innovation and the emergence of new technologies. While biotechnology or new materials clearly address the needs of particular industries and thus are influential on particular regions, with regard to Industry 4.0 and digitization, there can be an impact on almost any sector of manufacturing, many services used in everyday life or business, the expansion and reorganization of value chains and the manipulation of large data or algorithms.
Hence, experiences are as divergent as the wide range of regional and sectoral contexts within which these new technologies can be applied and implemented. Transportation, manufacturing or data processing vary according to industrial sectors, urban situations and value chains in which digital technologies are applied. Consequently, contributions by Industry 4.0 and digitization vary widely and can help in very different processes of development – in different places and with different effects. Thus, regions are significant as a basis for strong development and as expressions of the divergencies in such innovative processes. While considering these divergencies, competences in research are important and frequently supported by public policies. Governmental structures, which are characterized by centralized or federal structures, are significant and the concentration of especially high expertise at certain metropolises or regions is important for participation in network-driven innovation.
Thus, research on Industry 4.0 and digitization provides deeper knowledge on the regional effects of the socio-economic processes associated with the technologies and their applications. In addition, it allows for a deeper understanding of divergent systematics of innovation and about the interrelatedness of such processes. This also helps us to understand how much the application of new technological opportunities also relate to government programmes which support research and engineering and create a labour force with skills and education and so allow regions to benefit more fully from such newly emerging opportunities. The divergent situations formed by economic, industrial and socio-political variables indicate the opportunities and limitations of organizing such development. Furthermore, supply chains and the importance of value added from different sources in research, existing industrial competences and labour skills which meet the requirements of the new technologies, also indicate the relationship which exists, or can be built, with regard to economic and technological development of certain regions or metropolises. Profiles of such locations may change over time. They may be included into continental and global networks. New suppliers of knowledge, of goods and services from locations which have no history in such technologies may emerge. Consequently, Industry 4.0 and digitization indicate the regionalization of such processes which necessitate the reorganization of production chains and network-based innovation, as well as its management. In addition, it creates both the unexpected changes at particular regions and the opportunities of innovation in more traditional industries.
Industry 4.0 and digitization: regionally divergent adaptation to new opportunities
Although technological developments as such are not related with regions, nevertheless, regions demonstrate particular competences and relationships with newly emerging technologies (Bellini and Pasquinelli 2018). In addition, of course, there is a clear difference between developing new technological ideas and manufacturing new technological equipment on the one hand, and the application of such opportunities on the other. Consequently, some regions are the home of the competences needed to develop these new technologies, such as big data manipulation, algorithms and augmented reality, while others are associated with their application in manufactured products such as robots, equipment for transportation and logistics. Frequently, opportunities arising from digitization provide a nexus between technical equipment and software. Mobile devices and local detection technologies provide a basis for smart factories, new opportunities for medical services and for technical assistance, despite physical distance.
This also has a strong impact on the organization of manufacturing and the exploitation of divergent opportunities. Since original equipment manufacturers (OEMs) are widely based on supply chains, the management of different contributions and contributors has become highly critical. This is, even more, the case when it concerns highly complex elements and the incorporation of very high-quality processes or components into a final product. Thus, there is a convergent need for technologically advanced products, continuing quality, rapid transportation, on time delivery and reliable supply chains (Hickie 2020). In addition, there is the need to achieve this at low costs. While facing these new challenges, new technologies are applied in manufacturing, services and management. Smart factories, as an example, can be steered and managed remotely to a far greater extent than hitherto (see the contributions by Chung, Scherrer and Gaddi et al.). Timing, responses to changes in market demand, logistics and decisions about product lines, or when to modify products, can be subject of decisions taken far away and managed remotely.
Technological progress towards augmented reality assists the optimization of processes and services, as do new opportunities for visualization, which allow the handling of problems without being physically present. Local detection technologies can manage transportation facilities for the optimal use of the equipment and to reduce transportation times. In combination with 3D printer technologies and new materials, calculations of costs and availability have changed. The transfer of information and knowledge for such 3D printers provides a basis for services at locations where skilled and educated personnel is available at lower costs, where costs of transferring actual parts or personnel to other places are higher (see the contribution by Hickie and Hickie). Also, measurements for suits or shoes can be taken and transferred to a place where labour costs are low, while the transportation of the final product needs to be fast and easy. In addition, the simplification of some products will allow the contribution of labour costs to be reduced to the extent that cheap labour and weak regulation may become less important when compared with the security of supply and closeness to customers.
Consequently, data manipulation, the interconnectedness of machines and robots and optimal logistics in relation with the Internet of Things (IoT) will change structures, processes and contexts, and will be driven by algorithms for optimizing such processes. Such challenges to existing processes and value chains are the consequence of the need to reorganize in the light of Industry 4.0 and digitization. Regions, locations and metropolises participate in such processes and are embedded in their associated networks according to their capabilities, advantages, strengths and traditions. Since the new world of these technologies is not open to any location, it will be highly selective concerning integration into such advanced processes (see the contributions by Sandulli and Gimenez Fernandez, Hickie and Hickie and Baker et al.). Thus, understanding the underlying dynamics of these processes includes the complex relationship between manufacturing, R&D, services and how to manage these in the light of value chains, costs, reliability of supply and quality whilst manufacturing marketable products and affordable prices.
While decisions are taken on activities at locations making specific contributions to supply chains and value added, it is necessary to cope with both the changing division of labour within these processes and its multi-dimensional conditions [What are these. It is not clear?]. This is essential when it comes to being included into, or excluded from, these newly reorganizing transregional networks. Again, opportunities are divergent for regions or metropolises where the new technologies are developed, manufactured and put in place because of their ability to undertake complex processes of management and organization compared to those which are included because new technologies can be introduced and applied because they enjoy favourable transport links with suppliers and/or potential markets. Thus, Industry 4.0 and digitization clearly suggest that this is more than just about manufacturing and new technologies. It clearly includes innovations in management and organization to allow for appropriate supply chains and the remote steering of smart factories and services (see the contributions by Hickie and Hickie, Scherrer and Gaddi et al.). While doing so, this may include new locations as well as those which already contribute to supply chains, which may become reorganized with less autonomy and weaker local management control.
These tendencies indicate highly divergent processes of innovation (Lawton Smith and Assimakopoulos 2020). Some regions or metropolises continue with their outstanding competence in R&D by engaging in further strengthening these established competences. Others are facing the introduction of new technologies which may help them to retain their positions within reorganized value chains, but which may induce increased dependency on decisions taken elsewhere. Meanwhile, new technological opportunities may also create new opportunities for regions without a particularly competent manufacturing labour force. Consequently, the perception of such technologies is divergent from previous situations and capabilities. Where there is a pure application, of course, such technologies usually emerge newly [Not clear]. The wide-ranging consequences associated with Industry 4.0 and digitization give the impression of a rapid change which introduces fundamentally new situations perceived as disruptive changes. While in regions where these technologies are newly applied, they create the impression of disruption, by contrast in regions or metropolises where these new technologies are initially developed, one finds that they consecutively exploit strong competences in R&D which clearly deliver a wide range of advances and opportunities making a strong impact on manufacturing, management and organization globally.
Regionalization by competences: the industry-location-nexus
The technologies of Industry 4.0 and digitization are developed on the basis of earlier competences and can be applied wherever they are needed. The regional effect of these innovations, consequently, closely relates to established industrial situations whose manufacturing and R&D competences provide a basis for the development and application of digital technologies. The application of such technologies, in particular, is achieved in manufacturing industries which expect benefits from innovative equipment and services with regard to quality, costs or advanced products. Hence, the regional impact of these new technologies widely follows from existing industrial structures and situations which can take advantage of such opportunities (see the contribution by Scherrer). Consequently, it is a continuation and intensification of processes of regionalization which now relate to Industry 4.0 and digitization. When existing clusters are modernized and smart factories are established at these locations, there is a need for good transportation to distribute their products. Digitization means that proximity to transportation facilities becomes even more important. The transmission of information for specifically customized consumer products, or for certain numbers of particular industrial products to be applied or installed (e.g. robots), is related to their immediate availability, which necessitates appropriate infrastructures. The technological opportunities are selectively available among the locations in question, and their transportation needs indicate generally there will be a closeness to metropolitan areas.
While new technologies are always associated with change and with new contributors to R&D, as well as with new suppliers to value chains, the need for transportation and infrastructure continues and suggests both agglomerations of competences and industries and to suitably competent metropolises (see the contribution by Hilpert; Kerr et al. 2017). Capabilities in R&D can be built, but it takes time to become internationally recognized and to participate in the exchanges of innovative personnel which make them attractive partners in research networks (Hilpert and Lawton Smith 2014). This can easily take a decade and is dependent on the research facilities provided and research budgets spent. New suppliers can enter such networks faster by applying new technologies (as in Industry 4.0 and digitization), but they can do so in an economically attractive way only if they are able to manufacture more complex products. Again, this requires skilled and educated labour (Chung 2019; Vassiliadis and Hilpert 2020) which can easily take seven years to a decade to come on stream in the numbers needed to participate effectively. No matter whether such processes are based on high-performance manufacturing or on high-tech research, this indicates that the development and production of advanced products takes time. It takes time before emerging innovative locations will be regarded as frontrunners, and thus gain strong, competitive positions in markets.
While Industry 4.0 and digitization allows for many new opportunities, these technologies predominantly address existing industries, markets and products, which are already associated with particular firms and their competences to supply markets or to fit into value chains. Given enterprises are continuously orientated towards constant improvements in quality and the innovative capability of their products. In addition, they pay particular attention to the reliability of supply and the existing integration of innovation chains and to their longer term strategies (e.g. Aircraft Industries, Automobile, metalworking industries). Again, organization, culture and management capabilities matter even more in the light of such fundamentally important new technologies. The emergence of new locations is frequently associated with new technological opportunities, but rarely will it bring about the disappearanc...
