Digitalisation, automation and upgrading in global value chains – factory economy actors versus lead companies

This article investigates the differences in the application and impact of digital technologies between manufacturing subsidiaries and lead companies, the principal orchestrators of global automotive value chains. Utilising a dataset of 10 in-depth interviews with automotive industry actors, we analyse headquarters–subsidiary differences in the patterns of digitalisation-driven upgrading. A theoretical framework is offered that explains why the significant upgrading achievements of manufacturing subsidiaries deploying industry 4.0 technologies will not reduce the gap between lead companies and manufacturing subsidiaries in terms of value generation. We show that the concept of ‘industry 4.0’ is much narrower than that of ‘digitalisation’ and transition to smart factories is only part of the digital transformation story. Industry 4.0 technologies contribute to the upgrading of operations, and enable subsidiaries to take on production-related knowledge-intensive assignments (functional upgrading). Conversely, digitalisation serves lead companies’ strategic differentiation efforts, and facilitates achieving competitive advantage: the latter are crucial for value capture.