The Impact of Industrial Automation on Industrial Organisation: Implications for Developing Countries' Competitiveness

The paper examines profuse literature indicating the potential advantages of recent microelectronics-based industrial automation for developing countries in the light of present trends for the diffusion of industrial automation and their impact on industrial organisation in the mechanical engineering industry. It argues that industrial automation does not seem to be leading to the beneficial effects predicted in the literature. The paper points out that while diffusion of new technologies has proceeded at a rapid pace in developed countries, this has not been the case in developing countries, and suggests that industrial automation may lead to less production flexibility, higher optimal scales of output, increasing vertical integration and an ever-increasing research and development effort. These effects should make the process of industrial development for developing countries more difficult rather than easier. However, the paper also argues that developing countries have little choice but to adopt the new technologies if they are to have any chance of engaging in a sustained process of industrialisation and technical change.