Factors that affect the technological transition of firms toward the industry 4.0 technologies

This research aims to identify factors that affect the technological transition of firms toward industry 4.0 technologies (I4Ts) focusing on firm capabilities and policy impact using relatedness and complexity measures. For the analysis, a unique dataset of Korean manufacturing firms' patent and their financial and market information was used. Following the Principle of Relatedness, which is a recently shaped empirical principle in the field of economic complexity, economic geography, and regional studies, we build a technology space and then trace each firm's footprint on the space. Using the technology space of firms, we can identify firms that successfully develop a new industry 4.0 technology and examine whether their accumulated capabilities in their previous technology domains positively affect their technological diversification and which factors play a critical role in their transition towards industry 4.0. In addition, by combining data on whether the firms received government support for R&D activities, we further analyzed the role of government policy in supporting firms' knowledge activity in new industry 4.0 technologies. We found that firms with higher related technologies and more government support are more likely to enter new I4Ts. We expect our research to inform policymakers who aim to diversify firms' technological capabilities into I4Ts.