Industry 4.0: Driving Exports at the Cost of Technological Leadership and Employment

Industry 4.0 (I4.0) is revolutionizing the ways and processes of conducting international business but its impact on firm exports is not well understood. This is surprising because exporting is the dominant way of internationalization for most firms. We investigate how I4.0 influences firm exports, and subsequent strategic investments in the development of technological capabilities through R&D, and in employment. We integrate I4.0 functionalities with theoretical models of export performance to hypothesize that firms leveraging I4.0 will experience greater export success. However, we argue that these I4.0-induced exports are expected to lead to lower subsequent investments in R&D and employment compared to traditional exports, as I4.0 alters the ex-post conditions for internally developing technological capabilities and reduces the need of human expertise. Using representative data from Spanish manufacturing firms (2018-2020), we combine treatment (matching) with regression models and find support for our arguments. These results offer new insights into the changing nature of exporting in the I4.0 era and highlight a trade-off where I4.0-usage dampens traditional benefits of export-induced innovation and job creation. Our study bridges gaps in international business theory, particularly for exporting firms, holds important managerial implications, and contributes to understanding the broader societal impacts of I4.0 on employment and technological advancement.