Early evidence on how Industry 4.0 reshapes MNEs’ global value chains: The role of value creation versus value capturing by headquarters and foreign subsidiaries

Abstract

In anticipation of the upcoming changes and turbulence caused by Industry 4.0, in which digital integration connects all value chain members, managers at leading multinational enterprises (MNEs) are scrambling to predict the associated changes in the market. This pioneering study advances our understanding by investigating the impact of an MNE's Industry 4.0 orientation on the globalization of its value chain network. Identifying two types of value-generation activities as potential moderators, namely value creation and value capturing, we compare the moderation effects when these activities are conducted by headquarters versus foreign subsidiaries. We test the proposed model using a panel dataset comprising 5572 subsidiary-year observations from 358 Korean MNEs from 2011 to 2019. The results show that an MNE's Industry 4.0 orientation leads to a more rapid expansion of its distribution network than of its supplier network. Furthermore, value creation by headquarters has a stronger positive impact on the globalization of its distribution network than that of its supplier network, whereas value creation by subsidiaries has a stronger positive impact on the globalization of its supplier network than that of its distribution network. However, value capturing has a stronger impact on the globalization of the MNE's distribution network than that of its supplier network when performed by both locations. This study concludes by discussing the theoretical and managerial implications.

International business in the digital age: Global strategies in a world of national institutions

“…For example, virtual entry modes such as firm-specific websites or complementors in a platform enhance exporting opportunities, vastly increasing the potential scope of customers a firm can reach (Brouthers et al, 2022). Industry 4.0-related technologies enable the collection and analysis of large volumes of data on factory operations and value chains, thereby transforming internal and inter-firm coordination mechanisms (Dachs, Kinkel, & Ja ¨ger, 2019;Lee, Kim, Choi, & Jime ´nez, 2023;Strange & Zucchella, 2017). Virtual communication tools enable instant cross-border information sharing via for example social media or video conferencing.…”

“…The papers in this special issue address a wide variety of phenomena enabled by the digitalization of business (Table 5). Three papers analyze challenges of digital transformation in mature organizations and ecosystems: the impact of Industry 4.0 (Lee et al, 2023), solving wicked problems (Tatarinov et al, 2023) and management of digital human resources (Grimpe et al, 2023). Three papers analyze digital strategy from a platform user perspective, exploring how individuals and teams engage with partners around the world, including e-sport teams (Lin et al, 2023), crowdsourcing (Kumar et al, 2023) and cybersecurity (Madan et al, 2023).…”

“…The three papers on aspects of digital transformation explore different settings. First, Lee, Kim, Choi and Jime ´nez (2023) analyze the Industry 4.0-orientation of MNEs as a driver of external business relations at the subsidiary level. They find that Industry 4.0-orientation increases the external/total ratio of both sales and purchasing of MNE subsidiaries.…”

Reshoring: A Road to Industry 4.0 Transformation

“…It is crucial for companies to ensure that their supply chain partners maintain robust relationship ties and adhere to relevant laws and regulations. Importantly, Industry 4.0 technologies can be advantageous for optimizing supply chain networks (Lee et al, 2023). For example, employing open-source cloud-based physical systems with IoT and digital twins can foster transparency and enhance visibility into processes, essential for a resilient supply chain (Lampón and Rivo-López, 2022;Leng et al, 2021).…”

Research on the impact of industrial robot application on the status of countries in manufacturing global value chains

“…The use of industrial robots enhances the digital capabilities of companies and the efficiency of resource allocation [ 13 ], and increasing the proportion of industrial robot applications in developing countries can lead to higher technical efficiency, better sales and higher value added, enhancing the status of GVC [ 14 ]. The use of industrial robots also significantly expands the distribution network of multinational companies’ headquarters and the value creation of their subsidiaries, effectively enhancing their overall global value chain position [ 15 ]. The application of industrial robots has brought about improvements in productivity, optimization of factor structures, and green technology innovation in the global manufacturing sector [ 16 ], thereby improving energy efficiency, reducing carbon intensity, and enhancing the position of GVC [ 17 ].…”