Professor Vania Sena
The Future of the Economy is one of the three substantive research streams of the InterAct programme.
Digitalisation is central to the new generation of manufacturing systems and processes. The diffusion of new digital technologies creates distinctive challenges to firms and organizations, in terms of the adoption of new technologies as well as the management of transition.
Digitalisation may disrupt existing firms while accelerating new venture creation and change the existing industrial structure. Eventually, this will affect the structure of the wider economy and it will be shaped according to the needs and benefits of digitilsation across industry.
It is the aim of our Future of the Economy workgroup to investigate these impacts and generate actionable insights that will allow businesses to prepare for major changes to the way the manufacturing sector operates.
Our focus is distributed between three key areas:
Digitalisation, diffusion, and high growth
Crucially, digital technologies can help reconfigure capabilities within companies and across industries. Eventually this may alter all aspects of the UK’s industrial fabric by reshaping the drivers of high growth. However, so far, there is limited understanding of how this will happen. There is an expectation that the digitalisation will alter the structure of the knowledge networks of the UK economy, and this will change the nature of linkages among sectors. If so, what new linkages will emerge and how can we map them? How does knowledge diffuse across industries? What are the new channels of diffusion?
Digitalisation, industrial structure, and social mobility
We know digital technologies may lead to the emergence of ‘superstar’ manufacturing firms. However, this not the only consequence of digital transformation. Crucially, the combination of new technologies and trade openness has led to rising job polarisation, wage dispersion, and regional divergence. It is argued that new digital technologies may have a similar negative impact, in particular for women and marginalised groups.
What is the impact of digitalisation on social mobility and how can the existing trends be offset? Importantly, what institutions need to be in place to maximise social mobility and inclusivity? In this respect education and training are key factors that can offset these trends.
Evidence from many countries suggests that dedicated centres of innovation linking industry stakeholders can help develop new programmes for re-skilling. The UK already has some of these types of facilities which could be better exploited to galvanise industry-wide change. This is essential so that digitalisation may lead to local technological diversification. As such, if marshalled within a broader coordinated national policy response involving all stakeholders, digital technologies have the potential to help society make significant progress on societal challenges such as inclusivity as well as social mobility.
Digitalisation, the ‘Levelling Up’ agenda, and trade
Digital transformation creates tensions on the shape and the geography of the economy. Although often overlooked, these changes can be highly disruptive, as new generations of digital technologies replace and reshape industries, altering the geography of production as a result. Enhanced manufacturing performance can potentially help the ‘Levelling Up’ of many regions and indeed UK evidence already suggests that there are long-term local productivity advantages to the early adoption of digital technologies.
The fact that the levels of patenting activity, and particularly ICT-patenting activity, of the UK’s major manufacturing regions tends to be no more than ‘moderate’ by European standards further emphasises how important the rapid take-up of these digitalisation technologies is for the ‘Levelling Up’ Challenge.
SMEs are often at a financial as well as a technical disadvantage to deploy new capital-intensive technologies; at the same time, UK manufacturing is also more exposed to Brexit than other sectors, a trade shock which will impose significant costs to UK industry over those in other countries.
We want to address these two research questions:
- How can the diffusion of digital technologies in UK manufacturing contribute to the ‘Levelling Up’ agenda?
- How will the UK’s trade structures change in response to the manufacturing sector’s uptake of digital technologies?
The projects under the Future of the Economy workstream will examine the likely effects of digitalisation in manufacturing the context of the wider inter-industry, inter-regional, and international linkages evident in UK manufacturing. This will allow us to measure the impacts of digital transformations at the sectoral and regional scale and to consider the impacts of different digital-adoption scenarios across industries.