The discussion and perception of digitization and Industry 4.0 are widely concentrated on its technological impact and applications. Algorithms, artificial intelligence, the robots, remote steering of manufacturing plants, 3D printing, computing, new services, etc. are the dominant focus and point to a new future. In addition, there are discussions about the impact on employment, work, changes to industries and services, and what kinds of skills may become obsolete, or what new skills and competences will be in demand. New occupations will emerge while others may disappear. The overall picture and expectations are varied, and the various perceptions of the future are controversial. Similarly, the effects are highly divergent when regional situations are considered. There are regions which are the home of software developers, and others are locations where new technologies are applied. In addition, industrial structures, skills and education, supply chain structures, the products manufactured, the services provided and the composition of regional economies, refer to a wide range of divergent impacts of new Industry 4.0 technologies. Existing situations, their context and relationships, characterized through value chains, are often decisive and have a strong impact on the reorganization and management of the enterprises and supply chains which are critical to individual regions and metropolises.
This special issue contains contributions which shall help to build a better understanding of such new processes and why they are, of necessity, empirically highly divergent. The contributions cover a number of different issues and indicate that they may demonstrate divergent phenomena, although they refer to a common underlying rationality. The technologies related to industry 4.0 and digitization are as divergent as the regional situations they meet. But some regions may benefit more from these changes than others and some may even have problems participating at all. Since a modern, high-speed internet is a fundamental condition to participate in these changes and transformations, clearly many regions are left behind while metropolises are privileged. Agglomerations have better access to international communication and transportation, and providing the infrastructure necessary for modern industries and services is much more frequent in agglomerations than in peripheral regions. Nevertheless, the existing situations in industries, services, research and the labour force complemented by appropriate public policies contain the potential for uneven development. These can appear within countries across regions and may vary between metropolises and continents. Consequently, opportunities vary a lot but they refer to the same dynamism and rationality. Thus, empirical phenomena may refer to different industries, capabilities and situations and they may also involve technology developers or appliers.
Thus, it is important to integrate a rich diversity of examples and a comparative view, which both help to understand such processes as a system and over a longer period. The contributions contain examples from Spain (Catalonia and Basque Country), Italy (comparing the North East and North West, Centre and the South), Germany (Baden-Württemberg, Brandenburg, North Rhine-Westphalia), the US (Massachusetts) and Canada (Ontario) and Korea (Greater Seoul). In addition, locations are considered either as the 100 largest metropolises in the US compared with the European situation or when industries are considered which integrate locations into supply chains or value chains (aircraft, automobile etc.). Occasionally, reference is given to California, the United Kingdom, Detroit, or Washington State to illustrate such processes and examples of supply chains. This also includes the importance of governmental systems (see Germany, Spain, Italy, Korea, the US or Canada) and intermediary institutions and the relationship with services (see Massachusetts and Ontario). Services may change independently and they may also change when related with manufacturing or process industries (see Catalonia, the Basque Country, Italian and German regions, the different types of metros in the US and Europe and how these emerge in relation to aerospace, or over a longer period).
The changing situations of supply chains is also indicated when the remote steering of plants by smart factories is considered (see Italy and Korea) and how this impacts on management. While activities had to be organized and determined in individual plants, Industry 4.0 and digitization allows the planning of processes and variations during manufacturing, as well as control of machines, robots and other advanced equipment. In addition, inventories can be managed remotely, and robots can supply material from stock. Similarly, accounting and arranging for changes in processes can also be managed remotely. Consequently, many activities which were controlled by local management disappear when more can be organized virtually. Opportunities for data management help to move further in this direction and can even cope rather flexibly when special customer demands need to be satisfied. Geographical distance or different time zones decreasingly matter when processes and manufacturing can be arranged from far away. Also, when specific human competences are required because of specific situations and tasks required by particular products, this is not necessarily something that needs to be decided by management in the plant. This changes the working conditions, and the economic rationality of having the machines running all day long for the entire week means that employees need to be available according to the schedule whereby these new machines need to be programmed, re-arranged, or serviced. Such changes of situations and working conditions, of course, are closely associated with the locations where new equipment of Industry 4.0 is applied. More individual competences and human capabilities are required in regions where Industry 4.0 equipment is designed, developed, and manufactured and thus changes of working conditions and everyday life are less frequent or intense.
The increasing application of Industry 4.0 equipment and digitization of processes have a deep and far-ranging influence. While these issues are widely discussed regarding changes in manufacturing and processes or concerning skills, education and employment, the effects on the reorganization of supply chains and value chains have important impacts on regions and metropolises. The potential of industries, research and labour form divergent arrangements at locations which respond differently to such changes. Since both Industry 4.0 and digitization are increasingly important as part of continental and global value chains this is already rather selective. In addition, there are differences between enterprises and locations where equipment and software are developed and those where it is applied. Thus, the kind of participation in Industry 4.0 and digitization is widely determined by the position along the value chains. There are opportunities for suppliers and their locations to continue their development and modernization according to their relationship to the final OEMs. While they participate in the processes of innovation by advanced manufacturing, simultaneously, they now depend systematically on the final OEMs who use their products and services.
Consequently, there is uneven development even among regions which develop or employ such new equipment. Even progressive innovative development is divergent and is related to regions and metropolises according to their divergent situations. It is important to understand that the supply chains and value chains are highly heterogeneous and dependent positions within such networks refer to divergent competences. Specific competences can be tailored much more and so contributions to the value chains are highly divergent. It is the ways in which such divergent competences match the needs of value chains that are decisive for the level of development related to particular opportunities and processes of innovation. The chains are undergoing reorganization and the ways that this is experienced in regions and metropolises is based on their individual situations. Thus, skills, education, traditions and orientations in manufacturing or processing industries, as well as in services, create a situation and context which is fundamental for the kind of contribution to be made and how this is organized. These far-reaching conditions, and how they are arranged regionally and in metropolises, make Industry 4.0 and digitization a process which is indeed new, and has a deeper impact than just the introduction of new equipment. This is what this special issue wishes to express in the contributions focusing on specific elements and situations of the entire process in a comparative way.
The far-ranging aspects of the individual processes of development and how this relates with divergent regional development is discussed in the contribution by Ulrich Hilpert. It is important to see the rich diversity of relationships within Industry 4.0 and digitization. While it is discussed frequently, how a region may develop and what the effects of new technological opportunities are upon it, here it is the aim to develop the knowledge about enterprises, research capabilities, value chains and skill requirements into an understanding of where and how this may generate effects on socio-economic development. The innovative processes are realized alongside the value chains and, according to their regional or metropolitan advantages and competences, then locations can participate. Thus, this contribution argues that there needs to be a match between both industrial opportunities and innovative requirements. This matching is also required between these newly developed technologies if they are to be applied in other regions which are also faced for the first time with these changes in the technologies, organization and skills and education required of them. Thus, it is pointed out that there are different timelines of application to be established alongside the reorganization of value chains. Capabilities will already be established that will continue for a longer period and which will be resistant to fundamental changes. New ways of running plants within the supply chain by remote management and the transfer of information for 3D printers etc. allow a virtualization of space and replace proximity by the use of appropriate equipment at geographically dispersed locations. While such changes may appear rather sudden in some regions where enterprises introduce them, in fact, they represent continuities in the contexts of the design and development of technologies and of management strategies. Consequently, the paper argues that there is a clear tendency for uneven development based on structures which are associated with Industry 4.0 and digitization.
The important role of industries organized within supply chains and value chains is highlighted by the contribution of James Hickie and Desmond Hickie. They choose the cases of two highly globalized manufacturing industries indicating how these are organized and what structures currently exist. Understanding the rationality of both industries and how they may correspond to one another in applying new technologies, it becomes clear why certain regions are contributing to value chains and will continue to do so. The adoption of new technologies in the areas of Industry 4.0 and digitization cannot be understood without a clear picture of the importance of secure supply and how such new technologies may correspond with the situation of the enterprises at a particular place. This includes industrial competences, skills and education, and the potential to implement these changes into their manufacturing base. When comparing aircraft and automobile industries regarding their chains they highlight the similarities and the divergencies which relate to the complexity of the products. Such conditions become important for regions to continue their position within value chains, or for new regions to engage based on windows of opportunities which have opened and which match their capabilities and enterprises.
Arranging for appropriate situations becomes an increasingly important area of public policy. In governmental systems with strong regional governments, there are particular initiatives and attempts by regional administrations. The contribution by Francesco Sandulli, Elena Gimenez-Fernandez and Maria Rodriguez Ferradas address Catalonia and the Basque Country as important industrial centres for which they discuss activities in the light of the existing structures. They show that there is a need for appropriate programmes which match their situations and which allow for attractive positioning within supply chains. The cases selected point to the role of institutional structures which suit the local enterprises and their opportunities to make the regional industries fit for Industry 4.0 and digitization. It becomes very clear that having capable institutions alone will not provide for the innovative processes required. They refer to the exchange of knowledge among the agents with capabilities in these new subjects. When they highlight the process as driven strongly by engineering, they also indicate that there are opportunities for regions which may not have leading edge research but can build upon a strong tradition in technology application and engineering. While doing so, they also highlight that the individual regional policies can be very diverse while effectively exploiting these new opportunities.
The integration into European supply chains and value chains is an important context when new equipment based on Industry 4.0 is employed and new opportunities related with digitization are applied is shown by Matteo Gaddi, Nadia Garbellini and Francesco Garibaldo with regard to the highly diverse situation in Italy. There are the situations of North and South in Italy, and the problems of vitalizing the country’s disadvantaged region in the South which are challenged by processes associated with these innovations. Although there is the highly regarded technical university of Bari, there is little innovative activity which may change the situation of the surrounding regions. Thus, it may be difficult to establish competitive supply chains. In contrast, the authors show the uneven effect of national policies because they do meet the needs and circumstances of enterprises and regions in Northern Italy. The success which may be achieved, in the end, again may help to continue the country’s uneven development. On the other hand, the success of the Northern regions is widely dependent on supplying French and German industries. In doing so, and facing a trend towards smart factories which may be run by remote management, the paper points to the lack of attention the national policies pay to both skilled labour and to the broader societal effects even in such more modernized regions.
The importance of the full arrangement is expressed by Samuel Greef and Wolfgang Schroeder when they highlight both the existing industrial competences and the capabilities of regional governments. When they analyse the individual German Länder it turns out very clear that there are strong opportunities where the industrial structures are modern and open to innovations related with Industry 4.0 and digitization. They show very clearly how Bavaria, Baden-Württemberg and Northrhine-Westphalia match the new technologies and how they are ready to continue their position. In addition, strong policy programmes generate support to develop new technologies, apply new opportunities with existing products or to integrate new equipment into manufacturing processes. In contrast, there are rather limited opportunities to benefit from such changes when the Länder are industrially rather weak and public budgets are limited. National programmes and matching Länder programmes, in general, suit the industries ready for these innovations but clearly there is a tendency towards geographic concentrations. The authors can show how these processes and policies are contributing to uneven regional development characterized by innovative opportunities.
It is important to see that such uneven regional effects of Industry 4.0 and digitization are also of significant impact on metropolises with different structures. Since the effects are different because the situations are divergent, Yasmin Hilpert uses a comparative approach concerning metropolises in Europe and the US. The typology of metropolises she develops allows for a precise analysis of the data to compare the situations. Consequently, there are divergent demands for knowledge and differences concerning jobs which may fall away or will be created. Similarly, the author shows that requirements for skills and education create divergent agglomerations of talent and indicate the processes of development which are different between the types of metropolises. Finally, the European-US comparison shows that the effects of Industry 4.0 and digitization are different because of both the mix of industries and the higher average skill level in Europe. This indicates that experiences from different places can be used to develop a better understanding, but the context needs also to be considered. Thus, it is shown that Europe will have a different situation to the US and the typology will show divergencies among individual metropolises. Traditions in advanced manufacturing and a highly skilled labour force will help to avoid processes of societal polarization which is frequent in metropolises characterized by old industries and which lack a mix of industries.
The strong concentration of innovation related with Industry 4.0 and digitization follows from the advantage which metropolises provide when it comes to research, skills, education and infrastructure. While these areas of innovation clearly require appropriate situations to flourish, Sunyang Chung and Jiyoon Chung point to the effects across regions when policies are not designed to allow for participation from less central regions. The Korean strategy particularly aims at a diffusion of smart factories, but there is a concentration predominantly on Seoul, Gyeonggi and a few other regions of the country. These are the places which match best with the requirements to realize industry 4.0 and digitization but they also point to uneven regional opportunities as has already been identified in other countries. Metropolitan areas draw these firms and competences because they are appropriate locations for firms to modernize through applying these opportunities. Again, a relationship with the governmental structures and policy design becomes clear, when the authors note that a difficulty to successfully implement Industry 4.0 relates to the fact that regional governments have not been included in the ‘Presidential Committee on the Fourth Industrial Revolution’ (PCFIR). This again indicates how many different types of actors and activities need to be coordinated when launching this innovation.
The importance of the regional level is shown by Paul Baker and Helaina Gaspard when contributing their comparative study on software sectors in Massachusetts, USA, and Ontario, Canada. In addition to other studies on regions provided in this special issue, they pay particular attention to regional innovation policy which enables developments that help to build knowledge clusters. They highlight the role of interaction between the actors engaged in the region and, thus, demand for the contribution of intermediaries within regional networks. It is shown that structures are important, but activities are required to get processes running. The software example also indicates both that modern industries are closely linked with high-level services, and it shows how far-reaching Industry 4.0 and digitization are. Again, existing capacities of the regions are important and they play an enabling role when the stakeholders engage. As already noticed from the cross-sectoral impact of the new technologies, collaborations of actors are important to raise the potential of the regions based on intra- and intersectoral networks. When the authors show how important networks of knowledge and intermediaries are, it also becomes obvious that regions are in an advantaged situation to benefit from new opportunities when they already have established institutional contexts.
As could be learned through all these contributions, existing situations are important for future opportunities – to participate in innovation which is based on Industry 4.0 and digitization. Since the situations are varied there are also different perceptions of technologies. Walter Scherrer points out that whether technologies are developed in a region or applied makes a fundamental difference to the way they are perceived, which may lead to a misunderstanding of the techno-economic paradigm. While the developers of the technologies and new robots and equipment regard this as an advanced but consequential continuation of their research and design, those who buy and apply these technologies focus on the new opportunities and the change in organization and management they are facing. Clearly, the latter perspective and experience is one of a sudden change and the prevailing techno-economic paradigm is not perceived clearly. The author makes an important point by applying the long waves approach, which is more than just pointing to longer time periods, but it shows how important a full picture is to understand processes of innovation. What is demonstrated clearly is that, alongside the long waves, there are more detailed and systemic studies needed. The wide-spread applications from manufacturing and process industries to services and management, of course, make the analysis more complex.
As the contributions show, when analysing Industry 4.0 and digitization it is important to understand the situation and the context. While the existing capabilities and structures in industry and research are already well discussed these technologies, based on previous research and related to a wide range of opportunities, indicate that regional effects as well as innovation processes need to be understood in the context of processes which take place elsewhere. This helps the understanding of innovation more completely and it shows the position which individual enterprises and regions can fill. Value chains take advantage of divergent competences and integrate those as the final product put together. Global and increasingly European value chains are characterized by the divergent innovative contributions and improving services and software development at different places which contribute to them by making improved products available through the internet infrastructure. Thus, processes related with Industry 4.0 and digitization demand for more comprehensive analysis which includes these different topics.
The regional arrangement of research, industry and services, of course, varies according to the contribution they make within supply chains. The regions and metropolises where most advanced processes of innovation are located need a fully developed context which is complemented by access through the internet to capabilities from elsewhere and is home of the skilled labour force required. Increasing competition globally, or more specifically from south of the Mediterranean Sea, demands change and adjustment from regions which supply less complex products into supply chains. While these need to advance their capabilities to retain their competitiveness, there is also the opportunity to re-Europeanize supply chains since the new technologies of Industry 4.0 can also reduce the share of labour costs and make European locations attractive once again. It is not yet clear, in which areas such re-shoring will be realized, and whether, on the other hand, a combination of new technologies with cheap and unskilled labour might allow for new tendencies towards off-shoring.
Clearly, there will be activities to modify or change supply chains and value chains based on new technological opportunities. The different tendencies will impact on the situations of regions and metropolises in Europe and globally. As the contributions have shown, the effects also depend greatly on the skills and education of the work force. In many European regions initiatives to improve the levels of skill and the existing mix of industrial structures will help to balance the effects of these new technologies by creating a rich diversity of research capabilities and utilizing a wide range of traditional competences. The contributions to this special issue show that regional or metropolitan situations which can relate to a capable labour force from highly skilled blue-collar labour to well-educated knowledge workers can find themselves in a beneficial situation when it comes to innovation processes and they are also less affected by the risks of remote management related with smart factories. They are ready to create complex products and processes and be at the forefront of applications, or even engaging development and design. Consequently, they find attractive positions within the long waves and the longer the waves last, the more sustainable these arrangements might become. Public policies which include regional governments and allow for contributions from all stakeholders and engage institutions which address competent labour forces, as well as support of enterprises, are important for the realization of innovation based on Industry 4.0 and digitization. There is a need for much more research to understand these matters.
Last but not least we need to thank the ‘Hans-Böckler-Foundation, Düsseldorf, Germany’, for making a face-to-face workshop possible, which has helped our exchange of ideas and views and created a synergy throughout the group.