Transformational influence of Industry 4.0 on global production networks and value chains

The paper concerns the influence of Industry 4.0 on digital ecosystems within global production networks and value chains. Global industry leaders convert the main production functions in their global value chains (GVCs) to the digital format. Industry 4.0 vertically integrates manufacturing processes from product development to logistics and maintenance. The main features of the Industry 4.0 network structure include: (1) vertical networks of "smart" production systems; 2) horizontal integration through a new generation of GVCs networks; (3) engineering solutions along the entire value chain; (4) acceleration processes due to exponential technologies. The paper analyzes the horizontal and vertical digitization of companies’ value chains on the way to digital leadership and integrated ecosystem. The impact of the Industry 4.0 on the profitability and capital intensity for European countries is discussed. The competitive positions of some EU countries are indicated taking into account the prospects of technological development. It is proved that achieving strong positions in Industry 4.0 combined with growing investment increases significantly the capital productivity and strengthens competitiveness. Although the share of manufacturing value added in the EU declined, the rapid transition to technologies of Industry 4.0 is considered as the primary competitive advantage over the global competitors. The matrix of network readiness and value added in manufacturing of European countries is developed. Consequently, the European economies are divided into four main groups: Favorites, Traditional, Hesitators and Potential, and their capability for the Industry 4.0 implementation is estimated. Industry 4.0 creates challenges for the economies mainly specialized in low value-added segments of value chains, however, the companies that will manage to implement it successfully will be able to compete with the leaders and to occupy segments of GVC with higher value-added.