SOAS Research Online

Abstract

With a focus on a key production technology of the fourth industrial revolution, we look at the measurable impact of inward foreign direct investments (FDIs) and other host-country-specific factors on the adoption of industrial robots along two main segments of the automotive value chain. We find that FDIs per se do not have a significant effect on the adoption of industrial robots in the host country, but they become significant when interacted with proxies of host countries’ innovation capabilities. Using disaggregated data on robotisation and controlling for endogeneity, we also find that the combination of FDIs and local innovation capacity only impact on robot adoption in the case of the automotive assembly segment. Instead, host-country-specific factors characterising the local industrial eco-system drive robotisation in the components supply segment of the automotive value chain more than in its assembly segment. This confirms the importance of domestic productive capabilities development in the process of manufacturing automation, but also reveals that remarkable heterogeneity exists within the automotive sectoral value chain in terms of drivers of technology adoption.