Transformation of Industrial Policy towards Industry 4.0 and Its Impact on Firms' Competition

Although Europe is on the threshold of a new industrial revolution called Industry 4.0, many believe that this will increase the flexibility of production, the mass adaptation of products to consumers and the speed of their service; it will also improve product quality and dramatically increase productivity. However, as expected, all the benefits of Industry 4.0 face many of the inevitable changes and challenges they pose. One of them is the inevitable transformation of current competition and business models. This article examines the possible results of competitive conversion from the classic Bertrand and Cournot models to qualitatively new competition based on innovation. Ability to deliver a new product quickly and the possibility to produce the individual design (through flexible and quickly configurable factories) by reducing equipment failures and increasing process automation and control is highly important. This study shows that the ongoing transformation of the competition model is changing the game. This, together with the creation of complex value networks, means huge investments that make it particularly difficult for small and medium-sized enterprises. In addition, the ongoing digitalization of data raises new concerns regarding legal obligations, intellectual property, and security.





References:
[1] Eurostat, "Manufacturing statistics", Accessed on 10th of November 2020, https://ec.europa.eu/eurostat/statistics-explained/index.php?title=Manufacturing_statistics_-_NACE_Rev._2
[2] European Parliament, “Economic and scientific policy Industry 4.0”, Accessed on 24th of November 2020, https://www.europarl.europa.eu/RegData/etudes/STUD/2016/570007/IPOL_STU(2016)570007_EN.pdf
[3] H. Pack, K. Saggi, "Is there a case for industrial policy? A critical survey," The World Bank Res. Obser., 21(2), 2006, pp. 267-297.
[4] K. Warwick "Beyond Industrial Policy. Emerging issues and new trends," OECD Science: Techn. and Ind. Pol. Papers, Nr. 2, 2012.
[5] M. Bezpartochnyi, I. Britchenko, V. Bartosova, J. Mazanec, D. Chlebikova, O. Bezpartochna,... & L. Jamagidze, “Strategies for sustainable socio-economic development and mechanisms their implementation in the global dimension,” VUZF, 2019, pp. 72-81.
[6] M. Ottaviani, A. Prat, “The value of public information in monopoly,” Economet., 69(6), 2001, pp. 1673-1683.
[7] N. Singh, X. Vives, “Price and quantity competition in a differentiated duopoly,” The Rand jour. of econ., 1984, pp. 546-554.
[8] N. Economides, “Symmetric equilibrium existence and optimality in differentiated product markets,” Jour. of Econ. Theor., 47(1), 1989, pp. 178-194.
[9] H. Cremer, M. Marchand, J. F. Thisse, “Mixed oligopoly with differentiated products,” Intern. Jour. of Ind. Organ., 9(1), 1991, pp. 43-53.
[10] M. B. Vandenbosch, C. B. Weinberg, “Product and price competition in a two-dimensional vertical differentiation model,” Mark. Scien., 14(2), 1995, pp. 224-249.
[11] C. Benassi, A. Chirco, C. Colombo, “Vertical differentiation and the distribution of income,” Bull. of Econ. Res., 58(4), 2006, pp. 345-367.
[12] N., Boccard, X. Y. Wauthy “Ensuring quality provision through capacity regulation under price competition,” The BE Jour. of Theor. Econ., 10(1), 2010, pp. 47.
[13] M. R. Wildenbeest, “An empirical model of search with vertically differentiated products,” The RAND Jour. of Econ., 42(4), 2011, pp. 729-757.
[14] C. H., Tremblay, V. J. Tremblay, “The Cournot–Bertrand model and the degree of product differentiation,” Econ. Lett., 111(3), 2011, pp. 233-235.
[15] R. Makadok, D. G. Ross, “Taking industry structuring seriously: A strategic perspective on product differentiation,” Strat. Manag. Jour., 34(5), 2013, pp. 509-532.
[16] E. J. Bartelsman, M. Doms, "Understanding productivity: lessons from longitudinal microdata," J. of Econ. Liter., 38(3), 2000, pp. 569-594.
[17] C. Syverson, "What Determines Productivity?," J. of Econ. Liter., 49(2), 2011, pp. 326-365.
[18] S. Das, M. J. Roberts, J. R. Tybout, "Market entry costs, producer heterogeneity, and export dynamics," Economet., 75(3), 2007, pp. 837-873.
[19] M. Eslava, J. Haltiwanger, A. Kugler, M. Kugler, "Plant Survival, Market Fundamentals and Trade Liberalization," Mimeo, 2008.
[20] L. Foster, J. Haltiwanger, C. Syverson, "Reallocation, Firm Turnover, and Efficiency: Selection on Productivity or Profitability?," Amer. Econ. Rev., 98(1), 2008, pp. 394-425.
[21] J. De Loecker, "Product differentiation, multiproduct firms, and estimating the impact of trade liberalization on productivity," Economet., 79(5), 2011, pp. 1407-1451.
[22] M. J. Roberts, D. Y. Xu, X. Fan, S. Zhang, "A structural model of demand, cost, and export market selection for Chinese footwear producers," Nat. Bure. of Econ. Res., 17725, 2012.
[23] J. De Loecker, P. K. Goldberg, "Firm Performance in a Global Market," Ann Rev. of Econ., 6(1), 2014, pp. 201-227.
[24] P. Bianchi, L. Sandrine, "Empirical evidence on industrial policy using state aid data. Int. Rev. of App. Econ., 20(5), 2006, pp. 603-621.
[25] J. R., Church, and R. Ware, "Industrial organization: a strategic approach,", pp. 367-369. Homewood, IL.: Irwin McGraw Hill, 2000.
[26] R. R. Barthwal, "Industrial Economics: An Introductory Text Book. New Age International," 2007.
[27] G. S. Tung, C. Y. Lin, and C. Y. Wang, "The market structure, conduct and performance paradigm re-applied to the international tourist hotel industry," Afr. J. of Bus. Man., 4(6), 2010, pp. 1116-1125.
[28] M. Cimoli, G. Dosi, and J. Stiglitz, “The Rationale for Industrial and Innovation Policy,” Revis. do Serv. Públ., 66, 2015, pp. 55-68.
[29] A. Perrot, "Do national champions have anything to do with economics?" Competition Law and Economics: Advances in Competition Policy Enforcement in the EU and North America, 293, 2010.
[30] R. A. Ajami, K. Cool, G. J. Goddard, D. Khambata, "International business – theory and practice," M. E. Sharpe, 2006, pp. 10-350.
[31] D. B. Yoffie, "Beyond free trade – firms, governments, and global competition," Harvard Business Press, 1993, pp. 14-466.
[32] S. Quack, G. Morgan, R. Whitley, "National capitalisms, global competition, and economic performance," John Benjamins Publishing Company, 2000, pp. 5-322.
[33] P. S. Mehta, "A functional competition policy for India," Academic Foundation, 2006, pp. 22-294.
[34] K. Warwick, "Beyond Industrial Policy: Emerging Issues and New Trends," OECD Publishing, 2, 2013, pp. 1-15.
[35] M. J. Melitz, "The impact of trade on intra-industry reallocations and aggregate industry productivity," Economet., 71, 2003, pp. 1695-1725.
[36] E. Helpman, M. J. Melitz, and S. R. Yeaple, "Export versus FDI," Nat. Bur. of Econ. Res., 9439, 2003.
[37] P. K. Schott, "Across-product versus within-product specialization in international trade," The Quar. J. of Econ., 2, 2004, pp. 647-678.
[38] A. Gervais, "Product quality and firm heterogeneity in international trade," US Cen. Bur. Cent. for Econ. Stud. Pap., CES-WP-13-08, 2013.
[39] S. Duvaleix-Treguer, C. Emlinger, C. Gaigné, and K. Latouche, “Quality and export performance evidence from cheese industry,” 714-2016-48611, 2015, pp. 1-11.
[40] R. Baldwin, and J. Harrigan, "Zeros, quality, and space: Trade theory and trade evidence," Amer. Econ. Jour.: Microecon., 3(2), 2011, pp. 60-88.
[41] T. Mayer, M. J. Melitz, and G. I. Ottaviano, "Market size, competition, and the product mix of exporters," Amer. Econ. Rev., 104(2), 2014, pp. 495-536.
[42] R. C. Johnson, "Trade and prices with heterogeneous firms," J. of Intern. Econ., 86(1), 2012, pp. 43-56.
[43] R. E. Baldwin, T. Okubo, "International trade, offshoring and heterogeneous firms," Rev. of Intern. Econ., 22(1), 2014, 59-72.
[44] M. J. Melitz, "International trade and heterogeneous firms," The New Palgrav. Dict. of Econ., 2, 2008, pp.112.