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This study explores the strategic drivers of digital transformation
(DT) at subsidiaries. Our research framework derives strategic drivers from a tripod model that integrates the resource-based, the institution-based, and the industry-based views. We use two longitudinal case studies at global automotive suppliers’ Hungarian
subsidiaries. We found that each view highlights a different set of
strategic drivers. DT in the subsidiaries is boosted by proactive local management and mature process improvement routines (dynamic capabilities); parent–pull relation (internal institutions) and state support attracting manufacturing FDI (external institutions); as well as buyers’ increasing expectations and supplier-related factors (industry-based view). By combining these views, we claim that drivers related to the external institutional context and the industrial competition are usually filtered by the global management before contributing to resource adjustments at subsidiaries in a coercive top-down manner. Despite this seemingly deterministic DT process, local managements can actively shape DT, even that of the MNE.

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This paper starts with the hypothesis that in the era of agriculture 4.0, start-ups specialised in digital agricultural technology (AT) have the potential not only to rapidly grow but also to have a beneficial impact outside the core countries of agricultural innovation. To validate this assumption, we compiled data about a sample of Romanian and Hungarian AT start-ups entering the market with self-developed digital solutions. Based on extensive desk research, we identified the main distinctive features of the surveyed start-ups compared to their peers in advanced economies and answered the key related research question: How meaningful is the impact of these start-ups on the much needed upgrading of agricultural production in these countries? Our analysis reveals that although local AT start-ups in these countries do develop innovative solutions in the field of precision farming, farm management software, applications, and e-marketplaces, their number is below a threshold where they could have an impact on the upgrading of local agriculture. More importantly, the reduced size of the local market for technology and other hard-to-overcome barriers make it barely possible for them to grow as rapidly as some AT start-ups do in advanced economies.

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Recent trends in corporate venture capital (CVC) activities have added to the size and complexity of the financial system. Intuition suggests that in a period marked by spectacularly increasing start-up valuations, the opportunity to earn large capital gains increases the importance of corporate investors’ financial motivations.
Drawing on interviews with 12 Silicon Valley-based CVC units of global industrial companies, we examine if new trends in CVC investment represent a diversion from incumbents’ traditional focus on improving the competitive advantage of their core businesses. Building on the theory of the financialization of non-financial companies, we investigate the relationship between the strategic and financial motivations of CVC investing. We extend theory by distinguishing between developments at the extensive and intensive margins. We argue that the commonly applied quantitative measures capture financialization only at the extensive margin. Qualitative data indicate that the hypothesis of financialization does not hold at the intensive margin.

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This article explores the transition of integrated periphery countries
to a semi-periphery status. It sets out to refine the broad category of ‘semi-periphery’, distinguishing between upper and lower-order
semi-periphery. It shows that compared to established members
of the automotive semi-periphery, newcomers are often poorly
equipped to thrive in the new competitive environment. Since it
takes decades of organic accumulation to develop competitive
assets that provide resilience, newcomers that used to thrive in
the competitive environment of the integrated periphery often
turn out to be the weakest members in the semi-periphery. Based
on expert interviews, the article illustrates the theoretical arguments comparing the evolutionary trajectories of the Austrian and Hungarian automotive industries. We show that Austria, exemplifying the case of within-category upgrading (within the upper semiperiphery), can leverage its strong innovation potential, dense network of capable domestic-owned suppliers, tradition of cluster-based and industry – university collaboration, and developed market for technology. In contrast, the between-category transition of Hungary was propelled by the rising wage-level, while other indicators would not qualify it for the club of semi-periphery countries.
Evolutionary trajectories in the lower-order semi-periphery can
easily be derailed if industrial policy gets stuck in its – previously
highly effective – integrated-periphery role.

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In a context of rapid technological change, digital manufacturing technologies bear the promise of enabling significant improvement in operational efficiency. However, evidence indicates that investing in smart digital solutions, per se, does not guarantee performance improvement. Smart factory projects may be derailed, failing to realise the expected operational benefits. This study addresses the gap between academic propositions regarding the unequivocally positive impact of digitalisation and the actual evidence.

It draws on data obtained from 18 interviews with technology providers, managers and front-line workers at 12 Hungarian manufacturing companies. We use the concepts of resource complementarity, task–technology misfit, and technology acceptance as a theoretical lens to categorise the seemingly idiosyncratic and context-specific operational problems.

We find that digital technology implementation produces inferior-to-expectations outcomes unless companies invest in and upgrade their complementary intangible resources. Four distinct, albeit strongly interrelated types of complementarities are identified: managerial, organisational, skill-related and technical complementarities. Managerial capabilities to adjust the organisational structure, improve workflows and develop a strategy to address technical problems are found to be paramount to eliminate task-technology misfit and enhance technology acceptance.

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This paper discusses the impact of the transition to electric vehicles on the Hungarian automotive sector that is highly specialised in the manufacture of internal combustion engine vehicles and parts. Building on the industry lifecycle theory, we argue that electrification conveys many opportunities for upgrading, since it requires such a proliferation of innovative tasks that, coupled with a tight deadline imposed by the European regulatory framework, can be accomplished only through further decentralisation of R&D activities. Based on twenty expert interviews in Hungary and a review of global automotive actors' electrification-related transactions in central Europe, we find that the manufacturing-led growth model is not jeopardized by the transition to electrification, at least not in the medium run. Data suggests, however, that chances to harness the opportunities of electrification for meaningful industrial upgrading are low. Results predict continuity rather than radical change.

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Drawing on data from Hungarian manufacturing companies, this paper aims to explore the ways in which digital technologies affect the nature and routineness of work. It concludes that digital technologies impinge on some defining features of occupations, such as workload and intensity of work; the degree to which the tasks can be explicitly defined, measured and codified; composition and amount of skills required for task execution; and the importance of experience or tacit knowledge for task execution. Non-technological factors, such as managerial approach to technology and work design moderate outcomes. Evidence indicates that a reduction in the routine content of job tasks applies only to relatively skilled employees. For low-skilled employees, certain digital assistance solutions increase routine and engender deskilling. We conclude that a qualitative enrichment of shopfloor work becomes apparent only if (1) employees are skilled enough to become upskilled – and thus engaged not only in digitally enabled but also in digitally augmented, high-value activities; (2) employees’ work tasks are reorganised, work design and work practices modified, and employees upskilled. Without appropriate managerial interventions envisaging the augmentation of work, digital technology implementation entails deskilling and/or technological unemployment, rather than providing richer dimensions to shopfloor work.

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Numerous studies document the acceleration of technology and industry convergence and point out the role of digitalisation adding further impetus to these processes. However, the issue of how digitalisation engenders the blurring of industry boundaries has received little attention. This paper addresses this research gap and contributes to the conceptual understanding of blurring industry boundaries. We integrate previously disparate theories and constructs into a single conceptual framework to elucidate a mechanism by which digital technologies make industry boundaries increasingly permeable. The proposed mechanism is illustrated with references to recent developments in the automotive industry.

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This chapter explores the factors behind the apparent superior performance of green industrial policy (GIP) in developmental states (exemplified by China), as compared with the inefficiencies of GIP in developed countries (exemplified by the USA). The specific context is the overwhelming export competitiveness of green energy industry (GEI) actors in developmental states. Two intuitive explanations are analysed critically: differences between the two country groups in (1) the objectives of GIP and the proxies that measure policy performance, and in (2) the alignment of institutions and policies with the requirements of the growth phase of the industry life cycle.

The study highlights that the institutional, operational, and governance-related differences between these two country groups are less clear-cut than what is suggested in the literature.

Turning to the prospects of GIP, the study anticipates a turn of the tide in the ongoing global green race. It is argued that different phases in the industry life cycle are characterised by different drivers of growth. GEI actors in China displayed spectacular catching up and were forging ahead during the growth phase of the life cycle, when the development of green energy industries was driven by scale-up and progress along the learning curve. Since further development, in the current phase, is driven by complementarities and spillovers, ‘game is not over in the ongoing global green race’.

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Drawing on insights gathered from interviews with twelve Hungarian digital entrepreneurs operating in the automotive technology ecosystem, this paper explores the features of digital entrepreneurs outside the centres of digital technology production. We analyse the particularities of digital entrepreneurs in CEE, that is, whether the surveyed companies confirm the claim that digital entrepreneurs have a great potential to become levers of growth and upgrading. Can digital entrepreneurship in factory economies become a qualitative source of economic growth? Do they represent a strategic opportunity for CEE economies to shift to a relatively higher-road trajectory of economic development?

Contrasting the characteristics of the surveyed entrepreneurial ventures with the attributes of digital entrepreneurs described in academic literature, we conclude that the specifics of the surveyed companies do not fully and unambiguously conform to those described in the literature.

For instance, although the companies in the sample are all innovative in a Schumpeterian sense, their offerings were only in few cases disruptive. Instead of a ‘transformative impact’, the solutions of most of the companies enable the adopters of the technology to perform their traditional core activities more efficiently than previously. Instead of an explosive growth, most companies experienced only a more or less modest increase in revenues and employment. Access to finance proved one of the key obstacles to scaling up for most of them. Furthermore, contrary to the alleged rapid internationalisation of digital entrepreneurs, the majority of the surveyed companies remained local.

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Drawing on interviews with ten Hungarian digital automotive technology providers, this paper investigates how digital transformation can assist factory economy digital entrepreneurs in their integration in the highly concentrated automotive global value chains (GVCs).

We identified four mechanisms by which digital transformation can, in principle, produce opportunities for factory economy actors’ entrepreneurial integration in automotive GVCs, as follows.(1) New entrepreneurial opportunities in the digital realm; (2) Fine-slicing innovation and globalization of R&D; (3) Ecosystem-type innovation collaboration; (4) Interaction-intensity of custom-tailored digital services provision.

However, to realize the potential of these opportunities, a critical mass of capable digital entrepreneurs needs to be achieved: a long way to go for factory economies.

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This paper investigates whether advanced manufacturing technologies (AMT) can modify the patterns of upgrading in manufacturing subsidiaries operating in FDI hosting factory economies. Does the digital transformation of local manufacturing engender the accumulation of local technological and R&D capabilities, or the beneficial impact of AMT remains confined to production capability?

Analysis is based on primary data collected through in-depth interviews with a sample of high-flying manufacturing subsidiaries in Hungary, complemented with interviews with AMT providers.

We find that AMT have spectacularly improved all components of production capability. AMT redefined the boundaries of production activities and incited a fusion of selected technological activities in production activities. AMT deployment has automated selected tacit knowledge-intensive technological activities, making the related subsidiary-level capabilities obsolete. Conversely, other local technological activities have become more knowledge-intensive than before.

AMT propelled the upgrading of subsidiary-level R&D capabilities by supporting specific R&D activities and by acting as enabler of innovation collaboration. AMT created an integrated development environment and thus reduced the risks related to the decentralisation of R&D. Altogether, AMT adoption contributed to subsidiary R&D capability becoming ‘revealed’ and further upgraded through learning by doing.

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The objective of this chapter is to modify the original smile curve model and incorporate the concept of value capture. The extended model is used to explain the little (sometimes even missing) impact of functional upgrading on the value capture of subsidiaries specialised in activities that are represented at the bottom of the smile curve.

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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.

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This paper investigates whether the activities of start-ups specialising in artificial intelligence (AI)-powered solution provision could contribute to upgrading in dependent market economies. Mapping the ecosystem of Hungarian AI-solution providers, collecting, and analysing data of their solutions, activities, and performance, we identify the main mechanisms of AI-driven upgrading. We argue that AI-solution providers induce productivity and resource efficiency improvement at technology adopters by enabling process upgrading. By selling their services to the local subsidiaries of global companies, they intensify the local backward linkages of these companies. Increased local embeddedness of subsidiaries is an important manifestation of economic upgrading. Additionally, AI-solution providers diversify the drivers of growth. In dependent market economies, where export-oriented manufacturing activities controlled by efficiency-seeking foreign investors used to be the main (unique) growth engine, the activities of domestic-owned AI solution providers represent a new driver of growth: technology-oriented entrepreneurship. We found, however, that the economic impact of Hungarian AI-oriented ventures is limited, no matter how innovative their solutions are. Managerial implications include the indispensability of devising an adequate business development strategy and a value capture strategy. Without adequate entrepreneurial skills, and without being visible on the global stage of ‘AI-start-ups to watch’, the development prospects of even the most innovative ventures are limited. A key policy implication is that supporting the scaling up of AI start-ups by promoting the adoption of AI-powered solutions and stimulating venture capital financing promises good return on public investments.

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