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ABSTRACT
Drawing on interviews with ten Hungarian digital automotive technology providers, this paper investigates how digital transformation can assist factory economy digital entrepreneurs in their integration in the highly concentrated automotive global value chains (GVCs). We identified four mechanisms by which digital transformation can, in principle, produce opportunities for factory economies in progressing towards economy actors’ entrepreneurial integration in automotive GVCs, as follows. (1) New entrepreneurial opportunities in the digital realm; (2) Fine-slicing innovation and globalisation of R&D; (3) Ecosystem-type innovation collaboration; (4) Interaction-intensity of custom-tailored digital services provision. However, to realise the potential of these opportunities, a critical mass of capable digital entrepreneurs needs to be achieved: a long way to go for factory economies.
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Correction Statement
This article has been republished with minor changes. These changes do not impact the academic content of the article.
Notes
1. According to Baldwin’s (Citation2013) categorisation, in international production networks there are ‘headquarter economies’ where economic actors mainly govern the production networks (and carry out business development and other intangible, headquarter-specific activities), and ‘factory economies’ that provide the labour, i.e. they perform predominantly labour-intensive activities.
2. The cascade effect is a process in which the orchestrators of global value chains specialise in even higher value generating activities than previously. To do so, in a context of limited capacities, they delegate some relatively advanced activities to lower-tier GVC participants. In turn, when these suppliers take up these high(er)-value activities, they also relinquish some relatively advanced functions to even lower-tier GVC participants.
3. This is in line with the evolutionary view of technological development (Nelson & Winter, Citation1982) maintaining that technological change induces selection, retention and reconfiguration mechanisms.
4. The business digitisation index is a sub-index of the composite Digital Economy and Society Index. It measures the diffusion of electronic information sharing, cloud computing, and RFID technologies across business enterprises, as well as the incidence of eInvoices and corporate social media solutions.
5. Szerb et al. (Citation2018) provide a detailed overview of the state of affairs of Hungary’s digital entrepreneurship performance.
6. Hungary scored 50th in the 2018 edition of the Global Entrepreneurship and Development Index. By contrast, Poland scored 30th, Slovakia: 36th, and the Czech Republic: 38th (Ács, Szerb, Lafuente, & Lloyd, Citation2018, pp. 28–29.).
7. According to the results of the survey using the newly created European Index of Digital Entrepreneurship Systems, Hungary ranks 24th among EU28 (Autio, Szerb, Komlósi, & Tiszberger, Citation2018b).
8. Data for the share of the transport equipment industry in manufacturing employment and in total manufacturing export are available only for 2017: 16.9% and 35.5% respectively. Source: Author’s calculations from Central Statistical Office data.
9. Drawing on Gawer and Cusumano (Citation2014), I define platforms as products, services, or technologies (hardware and/or software) that serve as ground infrastructure upon which additional firms can build further complementary innovations and potentially generate network effects.
10. In selected areas, we could identify several companies. One area where numerous notable domestic-owned digital entrepreneurs are represented is the provision of industry 4.0 solutions for manufacturing companies, that is, development and deployment of cyber-physical systems, provision of system integration services, industrial automation, and development of various digital solutions supporting production-related business functions.
11. One exception is development of industrial design software, referred to as digital prototyping solution, (DPS). DPS is a solution used for virtual product or component design (testing, simulation, and generative design). DPS solutions, used in the automotive industry, had been developed by large global firms, not by Hungarian domestic-owned ones. However, these firms have several domestic-owned distributors of their solutions in Hungary. Local distributors provide knowledge-intensive support services to Hungary-based automotive industry suppliers, subscribers to the given solution. Another exception is a notable navigation technology company (that has solutions also in the field of infotainment and automotive cyber security). Originally a Hungarian start-up, this company does not count as domestic-owned any more, since it was acquired several years ago by a foreign company.
12. Virtual commissioning refers to 3D simulation of any interventions in a production plant, production line, or work cell. The proposed changes or expansion can thus be tested and validated in the virtual environment (in the digital twin model), before implemented in reality.
13. According to the 2019 Report of Startup Europe Partnership on tech scale-ups in Europe (SEP, Citation2019) the number of technology scale-ups, i.e. start-ups that managed to ‘break the early-stage barrier’, grow, and receive more than USD 1 million funding for their expansion, was 39 in Hungary. For the sake of comparison, the respective number was 2,217 in the UK, 649 in Germany, 79 in Austria, 78 in Poland, and 60 in Estonia. The report considered only technology and digital companies excluding pharma, biotech, life sciences and semiconductors.
14. Example of product-embedded solutions offered by the surveyed companies include the self-driving technology, the navigation technology, and the connected car technology. Example of (automotive) product-related digital solutions are mobility-as-a-service technology, telematics-based insurance technology, and the virtual marketing solution.
15. Nambisan (Citation2017, p. 1031) defines digital artefacts as a ‘digital component, application, or media content that is part of a new product (or service) and offers a specific functionality or value to the end-user.’