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.