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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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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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A tanulmány arra keres választ, hogy várhatóan miért nem jár a digitális átalakulás olyan mértékű pozitív hatásokkal a függő kapitalizmusmodellbe tartozó, közép-európai országokban, mint a fejlett gazdaságokban. Elsősorban magyarországi adatokra, korábbi interjúk és kérdőíves felmérések eredményeire támaszkodva, azokat a mechanizmusokat és hiányosságokat elemzi, amelyek megnehezítik, hogy a digitális átalakulás pozitív gazdasági hatásai kellő mértékben érvényre jussanak és akadályozzák, hogy a helyi szereplők kihasználják a digitalizációból fakadó lehetőségeket.

A tanulmány megállapítja, hogy

1) A digitális átalakulás következtében változott az értékláncokat alkotó tevékenységek köre és száma: a technológia egyes feladatokat automatizált, ezek helyett új feladatok keletkeztek. Módosult a meglévő, megmaradó tevékenységek stratégiai jelentősége. Az operatív és a stratégiai tevékenységek hozzáadott értéke közötti különbség tovább nőtt.

2) A digitális technológiák alkalmazása mind a bevételek, mind a költségek oldaláról pozitív hatást gyakorol a vállalati teljesítményre. A bevételi és a költségoldalon azonban messze nem egyforma a pozitív hatások mértéke és jelentősége. A digitális átalakulást célzó beruházások kiszámíthatóbb, de kisebb pozitív hatást gyakorolnak a vállalati teljesítményre, ha a digitális technológiákat a költségekkel összefüggő, hagyományos képességeket igénylő tevékenységek támogatására alkalmazzák, mint ha a bevételekkel összefüggő dinamikus képességeket igénylő tevékenységekére.

3) A függő kapitalizmusmodellbe tartozó, gyártó gazdaságok főszereplői, az anyavállalataik globális szervezetébe vertikálisan integrált helyi leányvállalatok hagyományos képességeket igénylő tevékenységekre szakosodnak. A digitális technológiák segítségével, ezek a szereplők még a korábbiaknál is költséghatékonyabban és pontosabban végzik azokat a feladatokat, amelyek egységnyi hozzáadott értéke az értékláncon belül relatíve kisebb.

4) A közvetlentőke-befektetéseket fogadó országok gazdaságai jelentős mértékben profitálnak e cégek digitalizációt célzó beruházásaiból: ezek eredményeként nő a helyi leányvállalatok állóeszköz- és immateriális tőkeállománya, termelékenysége, és a leányvállalatok funkcionális feljebb lépése eredményeként a helyileg létrehozott hozzáadott érték. A digitális technológiákba beruházó leányvállalatok a fejlődés, felzárkózás fő motorjai ezekben az országokban. E szereplők tevékenysége, fejlődése ugyanakkor a helyi gazdaságok hagyományos: költségeken és termelékenységen alapuló versenyelőnyét erősíti, holott a digitális átalakulással ezek a versenyelőnyök még a korábbiaknál is erőteljesebben szorulnak háttérbe az innovatív megoldásokon és üzleti modelleken alapuló versenyhez képest.

5) Ráadásul, a függő kapitalizmusmodellbe tartozó, gyártó gazdaságok főszereplői önállóan nem képesek profitálni a digitális átalakulásból. Ezzel szemben, a digitális átalakulás nyújtotta lehetőségeket önállóan kihasználni képes, gyorsan növekvő és nemzetköziesedő helyi technológiai vállalkozások köre alig fejlődött ki. Ennél is nagyobb gond, hogy e cégek egy részénél az elsőrangú technológiai képességek gyenge dinamikus képességekkel párosulnak. Ennek következtében, ezek a vállalkozások nem képesek leküzdeni a gyors, kiugró növekedés és nemzetköziesedés útjában álló akadályokat.

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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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The paper discusses the impact of industry 4.0 technologies on the value chain position of production. Another purpose is to investigate the impact of these technologies on a sample of ten manufacturing subsidiaries in Hungary. We find that the implementation of industry 4.0 technologies has neither led to the reshoring of production nor of activities that support production. Conversely, local production capacities have been upgraded: advanced manufacturing technologies deployed and integrated with existing systems.

The new technologies have had a complex impact on skills: both de-skilling effects and skill-biased implications can be observed.

Drawing on the empirical findings and on the reviewed literature, two predictions are developed regarding the implications of industry 4.0 technologies. First, the share of value chain activities considered operative (non-core) will increase, and the number of activities global value chain orchestrators consider as strategic (core-competence) will decrease. Second, differences in the value chain position (or rather, in the position along the smile curve) of individual operative activities will become smaller: the bottom of the smile curve will be broader and flatter.

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This paper investigates the impact of industry 4.0 technologies on the geographical reconfiguration of value chains from the perspective of FDI-hosting factory economies. Will they become net losers of technological change that prompts the reshoring of manufacturing and leads to the automation of knowledge work? Will their prior upgrading results vanish? Conceptual analysis based on the overview of both international business and science and engineering literature is contrasted with the results of in-depth interviews with multinational corporations’ Hungarian manufacturing subsidiaries.

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A tanulmány azt vizsgálja, hogy a fenntarthatósági szempontok globális értékláncokba integrálódása hozzájárul-e a magyarországi feldolgozóipari leányvállalatok feljebb lépéséhez. 25 hazai feldolgozóipari vállalat tapasztalatainak felmérése alapján bemutatom, hogy a környezeti fenntarthatóságot célzó beruházások révén a hazai leányvállalatok tevékenységének nem csupán a technológiai és K+F-igényessége erősödik, de a „zöldülés” következtében általában számottevő funkcionális feljebb lépésre is sor kerül.

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A cikk az ipar 4.0 technológiák környezeti hatásait vizsgálja 16 magyarországi feldolgozóipari leányvállalatnál készített mélyinterjú alapján. Megállapítja, hogy a kiberfizikai termelési rendszerek, a termelésirányítási és folyamatfelügyeleti rendszerek, a folyamatoptimalizálási algoritmusok, továbbá a digitális termékfejlesztési, illetve termékéletciklus-kezelési megoldások nem csupán a leányvállalatok termelési képességeit és erőforrás-hatékonyságát javítják, hanem környezeti teljesítményét is. Azt találja továbbá, hogy szoros összefüggés van a helyi leányvállalatok feljebb lépésének különböző dimenziói: a termék alapú, a termelési eljárás alapú, valamint a funkcionális feljebb lépés, illetve a környezeti teljesítmény szempontjából elemzett feljebb lépés és a digitális feljebb lépés között.

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The purpose of the paper is to demonstrate the beneficial impact of advanced manufacturing technologies (AMT) on firms’ environmental performance.

Drawing on interviews conducted with 16 Hungarian manufacturing subsidiaries on their experience with AMT, we find three functional areas, where the application of industry 4.0 solutions can not only enhance operational excellence and cost-efficiency, but it can also improve eco-efficiency, namely in the field of quality management (through smart production control, data analytics and predictive modelling solutions); process optimisation (through capacity planning and production scheduling solutions); product and process engineering (through advanced virtual technologies). We also find that AMT adoption facilitated subsidiary upgrading along various dimensions. The main managerial implication is that subsidiaries need to be proactive, and emphasise also the benefits stemming from energy and resource efficiency improvement when lobbying for investment in AMT.

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Background: Despite a widely acknowledged importance of intangible capital as the main driver of value creation, papers discussing corporate intangible investments tend to focus only on multinational companies, i.e. on headquarters (HQ). There are few papers scrutinising the specific attributes of intangible investments at manufacturing subsidiary level. This is, however, an important topic to investigate, since intangible investments can boost subsidiary upgrading. Intangible investments contribute to subsidiaries’ acquiring capabilities that allow them to enhance the scope of their responsibilities and specialise in increasingly high-value activities.

Purpose: The purpose of this paper is to explore the features of intangible investment at MNCs’ manufacturing subsidiaries, on the example of Hungary. Research questions addressed are as follows.

1. What exactly do local manufacturing subsidiaries invest in, when they implement intangible investments?

2. Is there a difference between the role of intangible investments at MNC level and at manufacturing subsidiary level?

3. What is the association between subsidiary-level intangible investments and upgrading?

Methodology: We analyse a sample of 44 manufacturing subsidiaries in the Hungarian automotive and electronics industries. We carry out a qualitative content analysis of sample companies’ notes to their financial statements, complemented with other sources of corporate information.

Findings: We find that intangible investments are aligned with subsidiaries’ functional specialisation: with operations. Their main role is to contribute to subsidiaries’ absorption of the headquarters’ technology transfer and enhance the productivity of the local core activities. This is sharply different from their traditional, MNC-level role: support to non-price competitiveness. We find support for the argument that subsidiary-level intangible investments and subsidiary upgrading are associated in a self-reinforcing virtuous circle.

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Chapter 7 by Andrea Szalavetz applies real options (RO) logic to the analysis of global companies’ crisis-driven organizational reconfiguration actions. Options that companies valuated and selected from, or applied in combination, were (1) commitment (increase of investments); (2) withdrawal; or (3) deferral. Szalavetz relies on interviews with manufacturing subsidiaries in Hungary to analyze the micro-mechanisms of global companies’ RO implementation—as perceived by the subsidiaries. Her specific research questions concern (a) the factors that determined the timing of global companies’ investments and divestments; (b) the role of organizational experimentation in preserving flexibility; and (c) the impact of organizational restructuring and resources reallocation on the Hungarian subsidiaries. It often proved difficult to establish an unambiguous direct association between the crisis and global companies’ organizational restructuring actions. Global companies considered flexibility of utmost importance when deciding on organizational reconfiguration. Flexibility was ensured mainly through deliberate organizational experimentation; consequently, parent companies’ decisions often proved reversible. Szalavetz argues that, on balance, the surveyed Hungarian subsidiaries have benefited from their owners’ cost-cutting and restructuring actions. The most frequent outcome of RO implementation was increased local commitment from global companies. Commitment increase was manifested in (a) capacity expansion and product upgrading at subsidiaries; (b) tangible and intangible investments in process upgrading and efficiency increase; and/or (c) subsidiaries’ functional upgrading driven by HQs’ delegation of additional tasks and responsibilities. Contrasting the empirical evidence with the findings of the received literature, she finds that evidence supports the importance of (a) host country attributes (wage level), (b) the structure of owners’ existing portfolios of subsidiaries, and (c) interdependencies among activities for subsidiary survival. As for the role of path dependence in influencing subsidiary fate, the findings are ambiguous. Prior commitment was often regarded as an important explanatory factor of subsequent investments during and after the crisis. However, global companies’ quests for flexibility and their systematic organizational experimentation have sometimes gone against path dependence. Some of subsidiaries’ previously gained mandates were lost because of their owners’ new strategic directions.

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