Industry 4.0 Technologies and Global Value Chains: Rethinking Geography, Efficiency, and Sustainability

During the last five decades, the world has experienced a rapid increase in international business and deep interconnectedness among firms and economies. MNEs have purchased, invested, outsourced, and offshored their manufacturing and services worldwide. Scholars and managers agree that the location of a firm’s activities is a critical factor, directly affecting production costs, diversification, and overall competitiveness. In this context, offshoring emerged as a fundamental strategy to harness the benefits of comparative global location advantages. However, a series of recent, high-impact events has significantly challenged globalization. These events include the US-China trade war, the COVID-19 crisis, and the war between Russia and Ukraine. These disruptions have fueled an intense academic debate. While some scholars have suggested that these recent crises have given rise to the deglobalization of the world, others have urged against interpreting these events as evidence of deglobalization. Meanwhile, resilient globalization emphasizes a shift from purely cost-centric models to risk-aware strategies, in which firms adopt and reconfigure their Global Value Chains (GVCs) to better withstand systemic shocks. Despite the growing number of surveys and empirical data-based studies, empirical studies exploring the motivations of firms considering the relocation of GVC activities to home countries, particularly within the current uncertain environment, remain limited. Existing empirical research highlights that relocation motivations are often driven by technological advancements, primarily those associated with Industry 4.0 (I4.0) technologies, making the relocation to home countries an increasingly attractive option for firms that seek to capitalize on these innovations. Advancements in automation directly challenge the traditional cost advantages of offshoring. Furthermore, they support sustainable manufacturing, enabling firms to simultaneously consider sustainability to minimize environmental impact while boosting operational efficiency and resilience. These innovations diminish the strategic importance of a factory’s geographic location and help the firms to gain a competitive advantage. This dissertation addresses this gap by examining the key motivations that reshape the geographical dispersion of the firm’s GVC activities, particularly under the adoption of I4.0 technologies in firms. The thesis is structured around three interrelated chapters: The first chapter offers a systematic literature review of the literature on the impact of the adoption of I4.0 technologies on the three dimensions of GVC simultaneously, i.e., geographical configuration, efficiency, and sustainability. By analyzing 73 papers, it clarifies a theoretical framework to show the complex interrelationships and effects among three dimensions. The second chapter empirically investigates how the adoption of I4.0 technologies and coordination costs reshape the geographical dispersion of the firm’s GVC activities at the same time. The third chapter moves the focus to the relationship between I4.0-enabled environmental sustainability practices and the geographical dispersion of GVC activities. Using firm-level data from multiple countries, the study findings demonstrate that by implementing the I4.0-enabled sustainability-oriented strategies, the firms are more likely to increase the geographically dispersed activities for GVCs. Collectively, the three studies in the thesis advance knowledge by clarifying the conceptual and empirical motivations of geographical dispersion of the firm’s GVC activities, finally showing how I4.0 technologies reshape GVC dynamics over time.