Lalics Proposal

Technological Convergence, Technological Diffusion and Structural Change in the Brazilian Industry:
an analysis of the impacts of Industry 4.0

Jorge Britto - Fluminense Federal University (UFF) - Brasil - britto.jorge@gmail.com

Introduction

.In the last years, the debate about the factors that would explain the low dynamism of the Brazilian
industry has become more intense. Contrasting with the idea that a generalized process of
deindustrialization had occurred in the last decades, several analyzes seek to qualify this process, pointing
to a more complex dynamics of productive transformation, contemplating adjustments to internal and
external factors that affect the dynamism of the Brazilian industry and its capacity to growth in the long term.
A more accurate analysis of these transformations would permit to identify evidences of dynamism, even in a
general adverse context, which can favor the resumption of industry growth on a more sustainable basis. It is
in this context, a particular element of the debate comprises on the diffusion of the principles related to the
"paradigm" of the so-called "Industry 4.0" on the Brazilian industrial structure, which would have the potential
to induce the intensification of investments in productive modernization and to increase the levels of
productivity and competitiveness. In this sense, the proposed study seeks to provide evidences about how
the efforts and capacities mobilized in order to incorporate those principles into the Brazilian industry,
evaluating the position of different sectors in relation to this process.
The concept of "Industry 4.0" describes the organization of production processes based on
technology and devices that communicate autonomously with each other along the value chain in virtual
digital structured systems. The concept of Industry 4.0 is elaborate in reference to what would be a "4th
industrial revolution", characterized by the integration and control of production from sensors and equipment
connected in digital networks, as well as by the fusion of the real world with the virtual, creating the so-called
cyber physical systems, supported by the use of artificial intelligence. As with other "revolutions" in
manufacturing, this new "paradigm" would comprise a vast array of changes in production processes,
design, product, operations, and production-related systems, affecting the value generation in different
organizational levels and throughout the value chain. This concept is therefore associated with a series of
disruptive innovations in industrial processes that result in significant productivity gains.
The 3rd Industrial Revolution (Industry 3.0), known as the era of electronics, was marked by the
widespread diffusion of information technology in manufacturing processes, in which machines started using
programmable logic controllers (PLCs) to command machines which could be reprogrammed to new
functions according to a new demand. Contrasting with this era, the 4th Industrial Revolution (industry 4.0)
comprises much more "natural" equipment integration in the production lines, characterized by the presence
of Cybernetic production lines well adapted to products ordered by customers directly via the internet without
human interference. According to Drath and Horch (2014) and Schwab (2016), the 4th Industrial Revolution
(4RI) may be understood as the era of applying cyber-physical systems (CPS) to production systems. This
4th Industrial Revolution is seen as a result of the confluences between information and communication
technologies, artificial intelligence, biotechnology, materials science and others technologies. "Many of these
innovations are in their infancy, but they are already reaching an inflection point in their development as they
build on and amplify each other in a fusion of technologies across the physical, digital and biological worlds."
(Schwab, 2016, p. . 1).
In this new context, connected equipment in the manufacturing sphere acquires the autonomy to
make "decisions" and to ask for help through wireless networks, generating a self-sufficiency structured
system, which allows greater flexibility and adaptability to attend the demands of the markets. In this phase,
machines, based on cyber-physical systems, begin to make decisions when to turn on, off or when to speed
up or reduce production in the manufacturing environment. While in the Germany these changes resulted in
elaboration of the concept of “Industry 4.0”, the Americans and the Chinese link this process to the notion of
“advanced manufacture”. This digital revolution would be motivated by technologies such as high speed
mobile internet, artificial intelligence, automation, "machine learning" (robots and computers that can self-
program and arrive at optimal solutions, starting from predetermined principles, providing improvements in
this self-programming capacity), besides the improvement of smaller and more powerful sensors, thus
enabling the consolidation of the “Internet of Things” (IoT). Improvements in the genetic biotechnology and
nanotechnology also reinforce this ongoing revolution and future disruptions. Although some of the
technologies of the fourth industrial revolution such as softwares, hardware, and the internet were
widespread developed and diffused in the third industrial revolution, they have suffered and are undergoing
continuous improvement. With the diffusion and cheap access, the increased capacity and the high speed of
data transfer, the internet become ubiquitous compared to the same network in the 1990s. The broad
diffusion and enhancement of Internet of Things - defined as a network of physical objects that contain
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embedded technology to communicate and interact with the external environment– tend also to be combined
to the widespread use of Big Data.
In this sense, the notion of Industry 4.0 can be associated to the combination of a set of
complementary technologies, such as: 1) Automated robots, which in addition to the current functions will in
the future be able to interact with other machines and with humans, more flexible and cooperative; 2)
Additive manufacturing, involving the production of parts, through 3D printers, which mold the product by
adding raw material, without the use of physical molds; 3) Complex Simulation methods that allow operators
to test and optimize processes and products even at the design stage, reducing costs and creation time; 4)
Horizontal and vertical integration of systems, through IT systems that integrate an automated value chain,
through the digitalization of data; 5) Big Data analysis, which identifies flaws in company processes, helping
to optimize production quality, saving energy and making resource utilization more efficient in production; 6)
Cloud computing, involving user-created databases, capable of being accessed from anywhere in the world,
through a multitude of devices connected to the Internet; 7) Cyber security, involving increasingly reliable
and sophisticated means of communication; 8) Augmented Reality, involving systems that perform a variety
of services, such as selecting parts in a warehouse and sending repair instructions through mobile devices
The concept of Industry 4.0 goes beyond the integration of processes associated with production
and distribution, also involving the different stages of the value chain: from the development of new products,
to the improvement of theirs design, testing and even simulation of production conditions to after-sales
services. The impacts extrapolate the generation of productivity gains on the factory floor, making it possible
to shorten the deadlines for launching new products in the market, to obtain greater flexibility of production
lines, to increase the productivity and efficiency in resources use (eg energy), affecting the ability of
companies to integrate their activities into global value chains. The increase of the flexibility of production
lines enables a process of mass customization. The instantaneous communication between different pointes
in the production chain and the development of highly flexible automation systems enable the production of
customized goods according to the preferences / needs of different consumers in a degree of efficiency that,
until recently, was only possible with the mass manufacture of goods.
The development of Industry 4.0 in Brazil involves challenges that range from investments in
equipment incorporating these technologies to the adaptation of layouts, forms of relationship between
companies along the production chain, demanding the development of new skills and competences. There is
a consensus among experts that Brazilian industry still remains in the transition from Industry 2.0 to Industry
3.0, which is reflected in a number of indicators related to the limited diffusion of digital technologies based
on the paradigm of Industry 4.0. It is estimated that it would be necessary to install about 165,000 industrial
robots for Brazil to approximate the current robotic density of Germany. Despite its relevance, Brazilian
industry is still familiarizing with the principles and technologies of Industry 4.0, a study released by the
National Confederation of Industry (CNI), conducted with 2,225 companies of all sizes, showed that only
48% of Brazilian industrial companies use at least one digital technology. Among small businesses, the
percentage drops to 25%. (CNI, 2016) The relative backwardness of Brazil is also evident because 43% of
the companies consulted by CNI do not identify which technologies have the potential to leverage the
competitiveness of the industrial sector. In small companies, this percentage rises to 57%. (CNI, 2016). On
the other hand, Accenture estimates that the implementation of technologies connected to the Internet of
Things in the various sectors of the economy should impact Brazilian GDP by approximately US $ 39 billion
by 2030. (CNI, 2016)

Objectives

To what extent emerging technologies related paradigm" of Industry 4.0 are and will be transforming
business models and patterns of competition in industry? Does these technologies constitute a window of
opportunity or a challenge for catching up strategies by countries and firms in developing nations? Do firms
differ in their current and expected uses of these technologies? The study seeks to evaluate the
dissemination of the principles related to the "paradigm" of Industry 4.0 in the Brazilian industrial structure,
based on evidence on the process of productive modernization, on the innovative efforts and on the profile of
the training of the workforce of the industrial companies in different sectors. In particular, it is considered that
these principles would be better placed to diffuse in industrial enterprises where productive modernization is
more intense and where innovative efforts and the profile of labor skills are more adequate, providing a
structured base to generate relevant impacts on the productivity and competitiveness of the industry.
Based on the analysis of indicators that try to capture the intensity of these efforts and capacities in
different sectors, the analysis intend to evaluate in which industrial sectors the diffusion of the principles
related to the "paradigm" of Industry 4.0 is potentially more advanced, as well as those in which the process
is expected to progress more rapidly in the near future. From this general objective the proposed analysis
unfolds some specific objectives, namely:

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 i) describe the concepts that define Industry 4.0, its origin, technologies and innovations applied in
manufacturing in different organizational spheres, as well as in different stages of the value
chain, connecting the firm with its suppliers and clients;
ii) evaluate the current and expected use of digital technologies related to the paradigm of Industry
4.0 in different areas (relation with suppliers and clients; product design; production process and,
firm level management), the probable impacts of those technologies on competitive drivers as
well as the current and planned capabilities´ mobilization and investments to operate the
expected technologies.
iii) collect evidence about efforts of the industrial sectors in terms of investments and expenditures
with technologies compatible with Industry 4.0 through the use of the indicators extracted from
the Brazilian Annual Industrial Survey (PIA-IBGE);
iv) identify from indicators collected by the Brazilian Innovation Survey (PINTEC-IBGE) evidences
about the potential connection between the diffusion of principles related to the "paradigm" of
Industry 4.0 and the intensification of process innovations and organizational innovations. The
analysis also intent to evaluate particular types of innovative spending and the impact of
innovations that potentially could indicate a greater commitment of companies and sectors to
those principles;
v) identify from information extracted from the Brazilian Annual Social Information Survey about
Employment and Wages (RAIS- MTe) evidences about changes in the composition of
professionals distributed by the various sectors of the industry, with emphasis on specific
occupations and specialized skills required to work in these shifts..

Rationale and Analytical Framework

The proposed analysis is based on the disruptive potential of innovations incorporated in the
industrial environment based on the principles of "Industry 4.0", which would be consolidated as a new
"paradigm" in terms of organization of the industrial processes, strongly linked to "convergence" and
"integration" of complementary technologies. However, it is also assumed that the pace of diffusion of these
technologies does not manifest itself with the same rhythm in the different industrial sectors. In addition, it is
considered that a particularly important aspect linked to this dynamic is related to changes in the qualification
requirements of human resources, which can influence the pace of incorporation of these technologies in the
industrial environment.
The magnitude of the possible impacts that principles of Industry 4.0 can bring is compatible with the
idea of a shifts in technological paradigm s discussed in a Neo-Schumpeterian perspective by authors such
as Nelson and Winter (1982) ), Dosi (1982), Freeman and Perez (1988), among others. According to Dosi
(1982), a technological paradigm can be defined as "a pattern of solutions to selective techno-economic
problems, based on selective principles that are also highly selective derived from primary knowledge and
experience." The notion of technological paradigm comprises a predominant set of technologies, procedures
and routines with broad impacts in terms of the diversity of fields of application (processes, products and
services) and of the forms of application (in terms methods and solutions for industrial problems). However,
Dosi (1982) also argues that problem-solving models or patterns to follow (conforming a new frontier of
principles that becomes common sense) need to be socially learned, facing some inertia, due to the need to
"unlearn" the old, which requires time to occur.
Freeman and Perez (1986), on the other hand, work with the concept of techno-economic paradigm,
describing technology as a "pervasive" effect that influences the behavior of firms and industries through the
economic system. They consider, in this sense, that the technological changes go beyond engineering
trajectories for specific products or technological processes that affect the structures of input costs and the
conditions of production or distribution through the system. They emphasize, therefore, that a new paradigm
emerges gradually as an ideal type of productive organization that reveals a potential for a jump in total
productivity opening up a range of new investment opportunities. Considering the main trends associated
with the new model of Industry 4.0, we can draw a parallel with the analysis of Freeman and Perez (1988),
for whom a new techno-economic paradigm involves some stylized elements: (a) a new "best practice" for
the organization of production and new skills in the workforce; b) a new product mix incorporating
"paradigmatic" technologies ; c) new trends related to incremental and radical innovations based on the
progressive use of the new key factors; d) new investment patterns as companies' relative cost structure
changes; e) the entry of new entrepreneurial firms in the growing markets due to the opportunities generated
by the paradigm shift; f) an increased participation of large companies, either by growth or diversification, in
the markets where the key factor is produced. "
The transition towards a new "technological paradigm" generally also involves the integration of
several technologies, and may be associated, to a greater or lesser extent, with a process of "technological
convergence". The concept of technological convergence (CT), proposed by Rosenberg (1963), points to the
similarity between possible technical bases to be used to manufacture products that differ in their use. He

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applied the concept to discuss the evolution of the machine tool industry in the nineteenth century, showing
that the technical bases of the companies in this sector and also of their client companies were approaching
because of the diffusion of innovations. The concept has been evolving, expanding its use as a relevant
analytical tool. Recent articles refer to TC as the process of blurring the boundaries between two or more
different industries by combining their scientific knowledge, technologies and markets (Prahalad and
Ramaswamy, 2003; Kim et al., 2015).
The technological convergence would be related, in particular, to the adoption of so-called generic
technologies (Gambardella, Torrisi, 1998, or General Purpose Technologies (GPTs) (Cantner and
Vannuccini, 2014). GPTs have been studied especially with reference to the emergence of new technology
paradigms and their broader impact on the economy (Jovanovic and Rousseau, 2005; Bresnahan, 2010).
According to Andreoni (2013), they share different technology properties: i) their being “transversal”, that is,
the extent to which they are deployed in multiple sectoral supply chains; ii) their degree of “embeddedness”,
that is, the extent to which they play a critical role within integrated technology systems; iii) their “quality
enhancing potential”, that is, the extent to which they allow increasing quality products and their
functionalities; iv) their “productivity enhancing potential”, that is, the extent to which they affect production
processes productivity; v) their being “strategic” in terms of facing major social and economic future
challenges or markets. The broad diffusion of these technologies bring the technological knowledge base
closer to the production processes of different sectors. Kim et al. (2015) also show that there is no
homogeneity among TC processes, with some tending to maturity and others to expansion. An example of a
widely known convergence process comprises the diffusion of information and communication technologies
(Basole et al, 2014). With the continuity of a convergence processes in digital technologies and its central
role to economic and technological development, industrial policies reinforces their focus on stimulus that try
to accelerate the diffusion of generic technologies.
It is usual that the process of innovation in technological convergence in a company occurs through
the development or introduction of new technologies already used in other sectors but unknown to the firm.
In this sense, the Technological Convergence is characterized, to some extent, by a confluence of processes
of innovation and diffusion. From the firm's point of view, a significant Technological Convergence process
can represent a qualitative leap in the firm's evolution, since it requires a technical discontinuity. It modifies
the technological base with which firms operate and their impacts possibly reach different organizational
areas of the company and also their external connections. Companies, therefore, need to qualify to introduce
new technologies. It is possible to argue that the business strategies adopted to act in a context of
Technological Convergence require, in addition to the intensification and qualitative change of investments in
productive modernization, the implementation of a differential policy for human resources. In this
perspective, it is assumed that the diffusion of new technologies requires "skill-biased" investments,
assuming a non-neutral character from the point of view of skills and abilities. So, the diffusion of new
technologies is often associated with organizational changes, which result in demands for new qualifications.
It is assumed that the impacts of new technologies in terms of new qualifications can be observed through
the analysis of changes in occupational composition of the workforce.
It is widely recognized that the set and technologies associated with the paradigm of the Industry 4.0
have the potential to generate relevant impacts on firms' competitiveness, creating significant opportunities
to reduce their costs and to improve flexibility, productivity, quality, speed and customization. They also have
the potential to alter industry boundaries, generating new business models, redefining critical competences
and transforming corporate strategies. According to the analysis of OECD (2017), the development of those
technologies will inevitably disrupt today’s industries, and incumbent firms will be challenged as new
technologies redefine the terms of competitive success. However, the incorporation of those technologies
has proved to be a challenge, with many companies struggling to design and implement a transformation
strategy well formatted to captures the benefits and to generate effective value from those technologies. In
order to obtain these gains, the analysis elaborated by BGG (2017) identify a set of five normative "lessons"
that could help the manufactures to improve their initiatives: 1) use the technologies associated with the
Industry 4.0 to accelerate operational improvements; 2) integrate new and existing capabilities and
technologies; 3) manage information architecture as a critical enabler; 4) thoughtfully design a transformation
roadmap; 5) approach Industry 4.0 as a change management project to the overall organization. What
makes the transition towards the paradigm of the Industry 4.0 distinct are unprecedented technological
capabilities that potentially impact all aspects of manufacturing execution. This transition will impact
manufacturing not only at the individual operation level but also at broader organizational and supply chain
levels and, in this context, to remain competitive, manufacturers should plan to adopt new technologies
rapidly.
The process by which these technologies are adopted and diffused at the firm level can be
approached analytically through the perspective of the theory of the firm. The changes in skills and
competences are pointed by theories that emphasize factors internal to firms as sources of competitive
advantage, such as the Resource Based View (RBV) (Barney; Wright , 1997), the dynamic competences
perspective (Teece et al., 1997) and the Neo-Schumpeterian evolutionary theory about routines and

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capabilities (Nelson, Winter, 2009). In these schools, important concepts for the analysis of the competitive
advantage, such as learning, knowledge, dynamic capabilities, etc, are strongly related to the capacity,
performance, and interaction of people and teams (Wright and Dunell, 2001). The importance of these
factors seems particularly relevant to developing countries. For example, the review by Zanello et al. (2015)
on innovation in these countries highlights a number of articles that show the importance of human
resources for innovation (including aspects such as managerial social ties and entrepreneurship, for
example).
The relatively scarce relevance attributed to variables related to the management of human
resources in the analysis of technological diffusion contrasts with the importance of these requirements in
the context of Technological Convergence. In fact, a critical aspect of TC refers specifically to the training of
personnel in different organizational instances in order to deal with the potential of new technologies. In
general, the possibilities for updating existing staff in new technologies are limited by the time available and
by the extension of the new knowledge required. An alternative comprises the hiring of new professionals,
specialized in the technologies that are being introduced. Thus, innovation in technological convergence
generally leads to the expansion of the range of skills and professions in the company. The increasing
variety in the mix of skills of the workforce is an important aspect of the internal effort to the firms towards the
Technological Convergence based on digital technologies.

Proposed methodology

The hypothesis of the analysis is that industrial enterprises in which productive modernization is
more intense, in which innovative efforts are of greater magnitude, and in which the profile of training of the
workforce is more adequate, the incorporation of principles related to the "paradigm" of Industry 4.0 would
have better conditions to be successful, generating a relevant impact on the productivity and
competitiveness of the industry. In this sense, the methodology of analysis and the indicators raised seek to
contemplate these dimensions.In the analysis to be carried out, the diffusion of the principles related to the
"paradigm" of Industry 4.0 on the Brazilian industrial structure will be addressed through two complementary
analysis: 1) an exploratory analysis based on a panel of 753 firms with 100 or more employees of 10
different industrial sectors, which cannot be taken as a representative sample of the Brazilian industry but it
is wide enough to provide an insight of current situation and upcoming trends from which interesting
implications can be drawn upon; 2) the exploration of evidences collected from secondary sources that allow
to identify aspects related to the capacities and strategies of industrial companies in the diffusion of
technologies related to the Paradigm of the Industry 4.0

Part 1 - Exploratory analysis based on primary sources of information - Preliminary Results

This analysis will be based on extensive survey carried out with a panel of high level executives of
Brazilian industrial firms in 2017 from different sectors. The survey provides their assessment and informed
perceptions on: (i) what will be the dominant technologies at their sectors; (ii) at firm level, current and fore
coming use of four generations of information and communication technologies (ICT), being 4IR
technologies the most advanced one, in different business areas (relation with suppliers and clients; product
design; production process and, firm management); (iii) current level of formalisation of planning efforts to
operate expected technologies in the future. The analysis is based on a panel of 753 firms with 100 or more
employees of 10 different industrial sectors; strictly it cannot be taken as a representative sample of the
Brazilian industry but it is wide enough to provide an insight of current situation and upcoming trends from
which interesting implications can be drawn upon.
The analysis was based on information collected by the project "Industry 2027: Risks and
Opportunities for Brazil In the face of Disruptive Innovations" whose focus is the actual and expected
diffusion of emerging technologies related to what has been denominated 4th Industrial Revolution. The
project aims to evaluate the impacts of a set of new technologies with high transformative potential on the
industry in the horizon of 5 to 10 years. Information was collected from an extensive survey carried out with a
panel of high level executives of Brazilian industrial firms in 2017 from different sectors. The objective is to
evaluate the stage of advancement of the Brazilian industry in the adoption of disruptive innovations, in order
to: 1) Position companies in relation to the technological frontier by identifying the intensity of current and
expected use of digital disruptive technologies in different organizational functions; 2) Determine the intensity
and amplitude of the actions adopted by the firms, considering the efforts effectively made to incorporate
disruptive technologies linked to the most advanced digital technological generation.
The focus of the empirical research and of the questionnaire applied to collected information from the
business sector was directed to the current and expected diffusion of emerging technologies related to the
"Digital Paradigm" of the 4th Industrial Revolution, which comprise clusters of innovations that affected
transversally the industrial sectors. The analysis tries to capture these impacts through the construction of a
single questionnaire of general validity applied to different industrial sectors. In addition, it is supposed that

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these technologies perform functions common to different economic activities, forming different technological
generations that can be characterized incorporating increasing degrees of "integration", "connection" and
"smartness". Thus, a basic hypothesis of the study comprises the evolutionary character of the trajectories of
Disruptive Innovations. In a stylized way, this evolutionary character might be associated with four digital
generations with the following specification: Generation 1 - Rigid Production: rigid and isolated automation
with limited and punctual use of information and communication technologies (ICTs), especially in
accounting, project and production; Generation 2 - Lean Production: flexible or semi-flexible automation with
the use of ICTs without integration or with only partial integration between organizational areas (eg CAD-
CAM, which integrates design and production); Generation 3 - Integrated Production: wide use of ICTs and
automation with integration and connection in all activities and organizational areas of the company;
Generation 4 - Connected Smart Production: wide use of ICTs in an integrated, connected and "smart" way.
Relevance of information feedbacks in the operation and other organizational areas to support the decision
process.
In order to elaborate the questions, the contribution of other surveys with similar focus was
considered, such as the survey about Industry 4.0 carried out by CNI in 2016, as well as others recent
surveys, in particular those elaborated by consulting firms (PwC, KPMG , MGI), public or private initiatives
(Brazil, Germany, Canada) and academic studies. Most of these researches seek to determine at what stage
a company is concerned with the use of specific technologies associated with the frontier, commonly referred
to as industry 4.0 or advanced manufacturing. As the Brazilian companies tend to be located at technological
levels far from the international frontier, the challenges of the this research were to capture, with reference to
the best practices, the different technological generations in which the respondent companies are. However,
the accumulation of experience with industrial studies about Brazilian industry indicates that the its
productive structure cannot be treated monolithically because the various sectors are intrinsically
heterogeneous, being organized around competitive dimensions that are different from each other, which
require different "mixes" of organizational competences. So, in order to reflect this perception, the company
was divided into five organizational functions: 1) relationship with suppliers; 2) product development; 3)
production management; 4) customer relationships; 5) business management.
The questionnaire sought to capture the "digital generations" of the technologies adopted in these
organizational functions, taking as reference a diffusion process structured through different sequential
stylized stages. Based on the differentiation between these different generations, we sought to identify, for
each organizational function, the respective reference technologies associated with it, as shown in Table 1.
Thus, characteristics of the reference digital technologies related to "Generation 4" are defined for each
organizational function, namely: 1) Relationship with suppliers through real-time tracking of orders and
logistics using Web services; 2) Product Development through virtual product and process modeling
systems; 3) Automated Production Management through M2M (Machine-to-Machine) communication
solutions; 4) Relationship with customers and consumers through technologies of monitoring in real time the
products in use; 5) Business Management through automated processes with support of Artificial
Intelligence and use of Big Data Analytics.

Table 1 - Characteristics of technologies related to "Digital Generations" and Organizational

Functions
Customer / Consumer
Supplier Relationship Product Development Production Management Business Management
Relations
Independent
Simple (rigid)
Generation Order transmission Computer-aided design Execution of contacts departmental / area
automation with
1 manually system and records manually information systems
unconnected machines
without integration
Integrated design,
Systems composed by
Generation Order transmission by engineering, and Partial or fully
Sales force automation integrated modules and
2 electronic means manufacture system automated process
database
with software support
Computerized support
Internet based Web platform with
Generation of purchasing Integrated product data Integrated process
integration and support databases to support
3 processes, stocks and development systems execution systems
system business analysis
payments
Relationship with
Virtual development Automated production Business management
Relationship with customers through
systems. Product management through through automated
suppliers through real- product monitoring
Generation development through M2M (Machine-to- processes supported by
time ordering and technologies in use.
4 virtual product and Machine) Artificial Intelligence and
logistics tracking with Monitoring and
process modeling communication the use of Big Data
Web services managing customer
systems solutions Analytics
lifecycles

The temporal references to the research were (i) the current period, called "Today"; (ii) the period
between five (2022) and ten years (2027), called the "Near Future". The purpose of this choice is to limit the

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empirical research to the so-called emerging technologies already in diffusion stages, thus excluding
innovations that, despite their radical potential, are not expected to be incorporated into the industrial world
within this ten-year horizon .
After these methodological considerations, it is important to present the characteristics of the main
strata of information collected from the empirical research. The answers obtained refer to the collection
period from 06/1/2017 to 1/11/2017, comprising a sampling of industrial establishments with 100 or more
employees, which can be stratified according to different analytical cuts. After a critical analysis, the original
base composed by 813 respondent establishments was reduced to 759 establishments. Table 1 presents
the characteristics of this sample. distinguishing cuts by size of firms (in terms of number of employees),
origin of capital and sector of activity.
In terms of size, it was observed that of the 477 companies that reported the number of employees -
equivalent to 63.85 of the total firms in the sample - 42.8% were classified as large companies (with more
than 500 employees); 22.0%, as medium-large companies (between 250-500 employees); and 35.2%, as
medium-sized companies (between 100-250 employees). In terms of the origin of capital, 87.2% of the panel
companies were owned by national capital. Finally, in terms of the insertion of companies in different
"production systems" broadly defined, the largest number of companies in the panel were inserted,
respectively, in Consumer Goods (18,.7% of the panel), Capital Goods (17.9% of the panel), Agroindustries
(15.4% of the panel), Basic Inputs (15.2% of the panel) and Chemicals (14.4% of the panel).

Table 1 - Characteristics of the Panel by size, origin of capital and productive system
Size Size %
Large companies (more than 500 employees 204 26,9% (42,8% of valid answers)
Medium-large companies (250-500 employees) 105 13,8% (22,0% of valid answers)
Medium-sized companies (100-250 employees) 168 22,1% (35,2% of valid answers)
No Answer 282 37,2%
Total 759 100,0%
Origin of Capital Origin of Capital %
National Companies 662 87,2%
Other (Multinational) 97 12,8%
Total 759 100,0%
Productive System Productive System %
Agroindustries 117 15,4%
Capital Goods 136 17,9%
Consumer Goods 142 18,7%
Automotive Complex 44 5,8%
Basic Inputs 115 15,2%
Chemicals 109 14,4%
Information and Communication Technologies 35 4,6%
Other 61 8,0%
Total 759 100,0%
Source: Own elaboration based on research data.

A first important aspect to be discussed from the information gathered in the empirical research is
the probability that the most advanced digital technologies will become dominant in the sector of the
respondent's in the near future (between 5 and 10 years). In this sense, "symbolic" technologies of
Generation 4.0 were used as reference for the different organizational functions, and an attempt was made
to identify the companies' perception of that probability, according to a scale that considers four "levels":
Very High ; High; Low; Very low.
The distribution of companies according to these levels for the different organizational functions and
for the aggregation of them is presented in Graphs 1 and 2. When considering the percentage of companies
that considered that probability to be "Very High", it is verified that it reached 23.4% for all organizational
functions, being higher in the case of Relationship with suppliers through real-time order and logistic tracking
with Web services (28.1%) and Customer relationship through technologies for monitoring the products in
use (26.2%). When considering the percentage of companies that considered that probability to be "High" or
"Very High", it was verified that it reached 64.0% for all areas, also being higher in the case of Relationship
with suppliers through real-time order and logistic tracking with Web services (77.5%) and in Customer
relationship through technologies for monitoring the products in use (71.4%).

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 Graph 1 - Probability of Generation 4.0 of digital technologies become dominant in the sector of the
respondent in the near future (between 5 and 10 years) - % of the number of respondents

6,7% 24,2% 40,6% 23,4% 5,1%

total

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Muito Baixa Baixa Alta Muito Alta Não Sabe

Source: Own elaboration based on research data.

.
Graph 2 - Probability of Generation 4.0 of digital technologies become dominant in the sector of the
respondent in the near future (between 5 and 10 years) in different organizational functions - % of
respondents that reported a high or very high level of diffusion
Relacionamento com
fornecedores por meio de
acompanhamento em
tempo real de pedidos e de
logística com uso de Web
services
49,4%

28,1%
Gestão do negócio por meio Desenvolvimento de
de processos automatizados produtos por meio de
com apoio de Inteligência sistemas de modelagem
33,9%
Artificial e utilização de Big 36,9% virtual do produto e do
24,0% 22,4%
Data Analytics processo

16,3%
26,2%
Relacionamento com
Gestão da produção
clientes através de 37,8% automatizada por meio de
tecnologias de 45,2%
soluções Comunicação
monitoramento dos
M2M (Máquina- Máquina)
produtos em uso

Alta Muito Alta

Source: Own elaboration based on research data.

Starting from the hypothesis that the respondent companies expect a high probability of diffusion of
the most advanced technologies in their sectors, it is of particular interest to analyze the position of these
companies concerning the current stage of diffusion of digital generations. So, it is possible to advance in the
discussion of a first aspect, related to the current diffusion ("today") of disruptive technologies. Considering
the panel as a whole, Graph 3 indicates that when we consider information from the five "organizational
functions" together, it turns out that only 1.6% of the panel companies were in Generation 4 in terms of the
adoption of digital technologies. More than that, 77.8% of the companies were in Generations 1 and 2, not
having yet reached Generation 3, equivalent to "Integrated Production.
Evidence of the current low level of disruptive technology diffusion does not change substantially
when one considers size and origin of capital. In the case of size, the information in Graph 3 indicates that, in
the case of large companies (more than 500 employees), only 1.9% were in Generation 4 of disruptive
technology diffusion, while 68.8% still were in Generations 1 and 2, setting some advancement, but not very
significant, in relation to the information for the panel as a whole. In the case of the origin of capital, it is
possible to highlight the level of diffusion between multinational companies that, theoretically, would have
greater access to those technologies. However, the information collected indicates that only 1.6% were in
Generation 4 of disruptive technology diffusion, while 70.3% were still in Generations 1 and 2.

8
Graph 3 - Distribution of Respondents According to Digital Generations - Today - % of the number of
companies - total of the panel, large size companies and multinational companies

Total 38,7% 39,1% 20,5% 1,6%

Mais de 500 empregados 26,2% 42,6% 29,3% 1,9%

Outras nacionalidades 28,0% 42,3% 28,0% 1,6%

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Geração 1 Geração 2 Geração 3 Geração 4

Source: Own elaboration based on research data.

With regard to organizational functions, there may be some differences in the current diffusion
indicated by the panel, which are by illustrated by Graph 4. The most advanced stage of the digital
technologies employed in the Supplier Relationship function is very noticeable. According to Graph 4, 33.0%
of companies nowadays adopt technologies related to Generations 3 and 4 in this organizational function,
the latter being incorporated by 2.8% of the companies, numbers higher than those indicated for the other
organizational functions. Negative highlights include the Production Management and Business
Management functions, with adoption rates of technologies related to Generations 3 and 4 reaching 15.1%
and 17.5% of respondents, respectively. Especially in the case of Generation 4 technologies, the results
(1.4% and 0.8%) are very low to those functions.

Graph 4 - Distribution of Respondents According to Digital Generations by Organizational Functions

- Today (2017) and Near Future (2027)

Gestão de Futuro 7,0% 29,6% 44,7% 18,7%

Negócios
Hoje 14,9% 67,6% 16,7% 0,8%

Futuro 14,4% 28,2% 37,0% 20,4%

Relacionamento
com Clientes Hoje 44,4% 32,1% 22,7% 0,8%

Gestão da Futuro 15,5% 33,2% 36,0% 15,3%

Produção
Hoje 42,7% 42,2% 13,7% 1,4%

Futuro 24,5% 26,4% 29,5% 19,6%

Desenvolvimento
do Produto Hoje 51,3% 27,0% 19,4% 2,4%

Relacionamento Futuro 11,7% 15,8% 37,5% 34,9%

com Fornecedores
Hoje 40,3% 26,7% 30,2% 2,8%

Futuro 14,6% 26,6% 36,9% 21,8%

Total Indústria Total
Hoje 38,7% 39,1% 20,5% 1,6%

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Geração 1 Geração 2 Geração 3 Geração 4

Source: Own elaboration based on research data.

After verify the current diffusion of disruptive technologies in Brazilian industry, it is important to
evaluate the companies' expectations about the future diffusion of these technologies, both in general terms
and in to the different organizational functions of the companies. In this sense, it is possible to confront
information about the current diffusion of these technologies with information about the expected diffusion of
them in a future horizon of 10 years, that uses as reference the year of 2027. Graph 4 also presents this
information. Considering all the organizational functions, in the case of Generation 4, there is a significant
increase in the intensity of diffusion, with an expectation that it will grow from 1.6% to 21.8% of the panel
9
companies between 2017 and 2027. In addition, the percentage of companies located in Generation 3 also
tends to increase, evolving from 20.5% in 2017 to 36.9% in 2027. As a consequence, the percentage of
companies between Generations 3 and 4 would increase from 22.2% in 2017 to 58.7% % in 2027,
corresponding to a growth of 165.0% in that share.
The general analysis of the current and future diffusion of disruptive technologies can be better
qualified considering the specificities of the different organizational functions. In order to compare the
intensity of the diffusion between these functions, it is possible to consider two aspects. Considering a more
selective criteria, we can restrict the analysis to the percentage of companies in Generation 4 Today and in
the Near Future for the different organizational functions. There is a higher percentage of diffusion in the
future in Supplier Relationships (34.9%) and Relationships with customers and consumers (20.4%). Already
in terms of growth of these percentages over 10 years, higher rates are observed in the functions of
Relationships with customers and consumers (from 0.8% to 20.4%) and Business Management (from 0.8%
to 18.7%). Expanding the criteria, it is also possible to consider the percentage of companies in Generations
3 and 4, Today and in the Near Future, for the different organizational functions. There is a higher
percentage of future distribution to Supplier Relationships (72.5%) and Business Management (63.4%). In
terms of growth of these percentages in 10 years, higher rates are observed to Business Management (from
17.5% to 63.4%) and Production Management (from 15.2% to 51.3% ).
Another alternative to analyze the evolution of the companies along the period considered involves
an attempt to identify the "migration" of the companies between the different generations to the all
organizational functions, as shown in Graph 5. In the case of 38.7% of the companies located in the
Generation 1 in 2017, the prospect would be that 14.2% would remain at that stage in 2027, 14.0% would
advance to Generation 2, 8.1% would advance to Generation 3 and 2.5% would advance to Generation 4
(which, in the latter case, seems improbable). In the case of 39.1% of the companies located in Generation 2
in 2017, the prospect would be that 11.8% would remain at that stage in 2027, 20.2% would advance to
Generation 3 and 6.8% would advance for Generation 4. Finally, in the case of 20.5% of the total of
companies located in Generation 3 in 2017, the perspective would be that 8.5% would remain at that stage
in 2027 and 11.1% would advance to Generation 4. Considering these figures, the most prominent point
seems to be the migration of companies from Generation 2 to Generation 3, a movement observed for
20.2% of the panel companies.

Graph 5 - Distribution of Respondents According to Digital Generations - Migration from Today to the
Future - in% of the number of respondents

25,0%

20,2%

20,0%

14,0%
11,1%
15,0%
14,2%
11,8%
8,1% 6,8% 8,5%

10,0% 2,5%

1,4%
5,0% Futuro - Geração 4
0,1%
0,8% Futuro - Geração 3
0,3% 0,1%
0,0% 0,1% Futuro - Geração 2
0,0%
Hoje - Geração 1
Hoje - Geração 2 Futuro - Geração 1
Hoje - Geração 3
Hoje - Geração 4

Source: Own elaboration based on research data.

One of the aspects contemplated in the empirical research, which directly influences the adoption of
disruptive innovations in the Brazilian industry, refers to the responsiveness of these technologies to the
increase of firms' competitiveness. With this aim, we tried to characterize the current and expected impacts
of the adoption of these technologies on firms' competitiveness. Initially, we tried to evaluate the company's

10
position in its market in a scale of competitiveness defined from a gradation in six levels, for today and
expected for the near future, in the country and in the world.
Graph 6 shows the distribution of companies in the scale of competitiveness, today and in the near
future, in the country and in the world. Taking the position in the country as a reference, 45.3% of the panel
companies were positioned as "high competitive" in the present, with this percentage increasing to 70.6%
when considering future expectations. Considering the competitive position of the companies in relation to
the world, 21.1% of the panel companies were positioned as "high competitive" in the present, with this
percentage increasing to 36.4% when considering the expectation regarding the future. Thus, the
expectation of growth of the percentage of companies positioned as "high competitive" reached 73%, taking
as reference the position in the country, and 56%, taking as reference the position in the world.

Graph 5 - Distribution of Respondents According to Level of Competitiveness - Today and Expected

to the Future - in% of the number of respondents

COMP_BR_Hoje 4,1% 45,8% 45,3% 4,7%

COMP_BR_Futuro 1,8% 19,8% 70,6% 7,8%

COMP_MUND_Hoje 18,1% 36,0% 21,1% 15,3% 9,6%

COMP_MUND_Futuro 9,2% 30,2% 36,4% 10,8% 13,4%

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

1-2 Baixa Competitividade 3-4 Média Competitividade 5-6 Alta Competitividade

Não sabe Não Atua

Source: Own elaboration based on research data.

After that, we sought to associate the diffusion of disruptive technologies with three general attributes
that determine firms' competitiveness: cost; readiness and customization. For each of the company's
organizational function, as well as for all of them, we asked the firms to evaluate the impact of the adoption
of digital technologies on each of the these three competitiveness attributes. Three levels of impact were
considered: Neutral; Moderate and High Impact. Graph 6 shows the percentage of companies that indicated
a current High Impact of the adoption of digital technologies on firms' competitiveness by Competitive
Attribute (Cost, Readiness, Customization).
Although the overall total obtained by the aggregation of organizational functions does not reveal a
more significant differentiation between the percentages of companies pointed out a "High Impact" for the
three attributes considered - with this percentage located around 30.0% to the three attributes - the
information disaggregated for the different organizational "functions" reveal some specific impacts. In the
case of Supplier Relationships, the percentage of "High Impact" associated with the "readiness" attribute is
relatively high. In the case of Product Development, we highlight the "High Impact" associated with the
"customization" attribute. In terms of Production Management, the differences are not significant, despite the
higher percentage of "High Impact" associated with the "cost" attribute. In the case of the Relationships with
customers and consumers, although the differences are not significant, the highest percentage of "High
Impact" would be associated with the attribute "customization". Finally, in the case of Business Management,
also with small differences, a higher percentage of "High Impact" would be associated with the "cost"
attribute.

11
 Graph 6 - Percentage of Respondents Indicating "High Impact" of Digital Technologies on
Competitiveness, by Competitive Attribute (Cost, Readiness, Customization) - TODAY - % of the
number of companies
36,0%

34,3% 34,3%
33,8%
34,0%
32,7% 32,5%
32,2%
32,0%
30,8% 30,9%30,7% 30,7%

30,0%
29,0% 28,8% 28,7%
28,1% 28,0%
28,0% 27,2%

26,0%
25,0%
24,5%
24,0%

22,0%

20,0%
Custo Prontidão Customização

Relac. Forn. Desen. Prod. Gest. Prod. Relac. Clien. Gest. Neg. Total

Source: Own elaboration based on research data.

In order to assess the responsiveness of business strategies to the potential impacts of digital
technologies, it is possible to consider the ongoing actions that illustrate the effective efforts made by the
companies to incorporate those technologies. This analysis comprises two steps. First, considering the
technological generation indicated for use in the near future, the companies were asked about what actions
they were actually taken in the present. The intensity of this effort is illustrated by Graph 7, which distributes
the companies according to the current actions indicated by the respondents in order to incorporate the
technologies expected to be diffused in the near future. Four alternatives, in terms of an ascending intensity
of efforts, are considered: i) No actions; ii) Initial Studies; iii) Project approved, but not started; iv) Actions
already in execution. First, for all of the organizational functions, 17.5% of the companies presented actions
in execution, while 31.6% of the companies presented actions in execution or projects approved, but not yet
started. Considering the different organizational functions, it can be seen that higher percentages of actions
in execution were found in Relationships with suppliers (23.3%) and Business Management (18.2%). When
considering the sum of the percentages of actions executed with approved projects, the highest percentages
are observed in Relationships with suppliers (39.8%) and Relationships with customers and consumers
(31.6%).

Graph 7 - Percentage of respondents according to the intensity of current actions adopted in order to
incorporate digital technologies expected to be diffused in the near future

Total de Funções 30,1% 38,2% 14,2% 17,5%

Relacionamento com fornecedores 26,1% 34,1% 16,5% 23,3%

Desenvolvimento de Produto 39,4% 34,3% 12,3% 14,1%

Gestão da Produção 27,5% 42,6% 15,2% 14,8%

Relacionamento com clientes/ consumidores 27,0% 41,4% 14,6% 17,0%

Gestão de Negócios 30,7% 38,7% 12,4% 18,2%

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

1 - nenhuma ação 2 - estudos iniciais 3 - plano aprovados, mas não iniciados 4 - plano em execução

Source: Own elaboration based on research data.

The analysis can be complemented with information about the intersection between the expectation
of incorporation of digital technologies in the near future and the intensity of efforts made by the companies
12
in the present. This information is presented in Graph 8. According to the information presented, of the total
26.6% of companies expecting to reach Generation 2 in the future, 10.9% (or 41.0% of this subgroup) were
still conducting initial studies; 3.4% (or 12.9% of this subgroup) have projects approved, but not yet started;
and 3.4% (or 12.7% of this subgroup) already presented actions in execution. In the case of a total of 36.9%
of companies expected to reach Generation 3 in the future, 15.8% (or 42.7% of this subgroup) still carried
out initial studies, 6.6% (or 17.8% % of this subgroup) have projects approved, but not yet started; and 7.6%
(or 20.5% of this subgroup) already presented actions in execution. Finally, for the total of 36.9% of
companies expecting to reach Generation 4 in the future, 8.9% (or 40.6% of this subgroup) still carried out
initial studies, 4.0% (or 18.3% of this subgroup) have projects approved, but not yet started; and 5.9% (or
27.0% of this subgroup) already presented actions in execution.
The information presented also indicates that of the total 38.2% of companies in the base, currently
carrying out initial studies for the adoption of digital base technologies, 10.9% (or 28.6% of this subgroup)
had expected to reach Generation 2 in the future, 15.8% (or 41.3% of this subgroup) had expected to reach
Generation 3 in the future and 8.9% (or 23.2% of this subgroup) had expected to reach Generation 4 in the
future. Already, among the 14.2% of the companies in the base with projects approved, but not yet started,
3.4% (or 24.2% of this subgroup) were expected to reach Generation 2 in the future, 6.6% (or 46.5% of this
subgroup) were expected to reach Generation 3 in the future and 4.0% (or 28.1% of this subgroup) were
expected to achieve Generation 4 in the future. Finally, among the 17.5% of the companies that already
presented actions in execution to the adoption of digital based technologies, 3.4% (or 19.3% of this
subgroup) expected to reach Generation 2 in the future, 7.6% (or 43.4% of this subgroup) were expected to
reach Generation 3 in the future and 5.9% (or 33.6% of this subgroup) expected to achieve Generation 4 in
the future.

Graph 8 - intersection between the expectation of incorporation of digital technologies in the near
future and the intensity of efforts made by the companies in the present.

15,8%
16,0%

14,0%

10,9%
12,0% 11,2%

7,6%
10,0%
8,9%
8,9%
6,6% 5,9%
8,0%
3,4%

6,0% 3,4%7,0%
0,6% 4,0%
2,6%
4,0% 0,2%
4 - Plano em execução

2,0%
3 - Plano aprovads, mas não iniciado
3,1%
0,0% 2 - Estudos iniciais

Geração 1
Geração 2 1 - Nenhuma ação
Geração 3
Geração 4

Source: Own elaboration based on research data.

After that, the analysis tries to consider the actions taken by the firms specifically linked to the
diffusion of the more advanced generation of digital technologies in its different organizational functions. The
intensity of this effort is illustrated by Graph 9, which distributes the companies, for the different
organizational functions, according to the intensity of actions indicated by the respondents in order to
incorporate the technologies of Generation 4.0. In terms of the intensity of these efforts, the same four
alternates, in ascending intensity of efforts, are considered: i) No action; ii) Initial Studies; iii) Project
approved, but not started; iv) Actions already in execution. A distinction is also made between three areas for
which efforts can be directed: Investment, R&D, and Training.
Evidence from the empirical research indicates that the intensity of efforts to incorporate Generation
4.0 technologies is still rather limited. Grouping the three areas of efforts (Investment, R&D and Training)
and considering the composition of the different organizational functions, the percentage of companies that
reported actions already in execution reached 15.1%. On the other hand, if companies with projects
approved but not yet started are also considered, this percentage reached 30.5%. Considering the different
organizational functions, it can be seen that the percentage of companies with actions already in execution
reached a higher value in the case of Relations with suppliers, in which this percentage rose to 20.2%,
13
reaching 37.9% when considers also the companies with project approved, but not yet started. In contrast,
the function of Business Management was that in which the percentage of firms with actions already in
execution reached a lower value of 10.0% of the panel companies, reaching 23.7% when considering also
the companies with approved projects.

Graph 9 - Current actions indicated by the respondents to incorporate digital technologies of

Generation 4.0 - % of the number of respondents

Indústria Geral 39,4% 30,2% 15,4% 15,1%

Relac. Forn. 31,8% 30,4% 17,7% 20,2%

Desen. Prod. 42,4% 27,1% 14,8% 15,7%

Gest. Prod. 39,8% 31,3% 15,1% 13,7%

Relac. Clien. 35,8% 33,0% 15,6% 15,5%

Gest. Neg. 47,3% 28,9% 13,7% 10,0%

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Nenhuma ação Estudos Iniciais Projeto aprovado, mas não iniciado Ação em execução

Source: Own elaboration based on research data.

Graph 10 also compares the efforts related to the three areas investigated - Investment, R&D and
Training - distributed to different organizational functions. Specifically, to each organizational function, we
consider the sum of the percentage of firms with actions already in execution and firms with project
approved, but not yet started. When considering the different organizational functions, some particularities
can be highlighted. Considering the percentage of companies with approved project or actions in execution,
it is verified that in the case of Investments, greater intensity of the efforts was observed to the Relationships
with suppliers. In the case of R&D, greater intensity of efforts was observed in Product Development and
Business Management. Concerning Training efforts, a greater intensity of efforts was observed in
Relationships with customers and consumers and in Production Management.

Graph 10 - Current actions indicated by the respondents to incorporate digital technologies of

Generation 4.0 in terms of Investment, R&D and Training - % of respondents with actions in
execution and firms with projects approved, but not started
Relac. Forn.

37,2%

31,5%
31,3%
Gest. Neg. Desen. Prod.
34,4%
33,0% 32,3% 32,3% 35,5%
32,5%

30,9%
32,4%
33,2% 32,4%
35,9% 35,1%

Relac. Clien. Gest. Prod.

Investimento P&D treinamento

Source: Own elaboration based on research data.

14
 In general, the information presented corroborates the fact that, despite the expectation of
accelerating the diffusion of technologies 4.0, their high probability of becoming dominant in the sectors of
activity of companies and their potential impact on the different attributes of competitiveness, the efforts
currently made by companies to incorporate these technologies is still very limited. Some preliminary
conclusions can also be pointed out. As a general trend, there is an extremely low adoption rate of 4.0
technologies in the present. By 2027, however, a significant increase in the rate of adoption of these
technologies is expected, which may be based on stimuli of the sector's competitive dynamics and on the
possibility of generating effective impacts on different attributes that determine firms' competitiveness. The
evidences collected also indicates that these innovations can be implemented in distinct areas of the
company at a different pace, and that, eventually, feedback mechanisms may arise among several
organizational functions that can generate an acceleration of the diffusion rate. Starting from these
preliminary conclusions, and with basis on a statistical-econometric model, we seek to discuss the
connections established between the expectations of future incorporation of these technologies and the
efforts actually made by the companies, articulating this discussion with the available information about firms'
competencies, in the line with the analytical framework of the "dynamic capabilities" of the firms.

Part 2 - Exploratory analysis based on secondary sources of information

The diffusion of technologies related to the paradigm" of Industry 4.0 on the Brazilian industrial
structure will be also captured indirectly, trough the analysis of evidences about the process of
modernization of production, innovative efforts and the profile of capacities of the industrial companies
working in different sectors.
Concerining the process of productive modernization, it is assumed that the connection between
productive modernization and the adoption of the principles of Industry 4.0 has a strong interrelationship. On
the one hand, the adaptation of the different sectors to those principles requires an intensification of the
investment process, particularly in the acquisition of new equipment and software. On the other hand, it is
also to be expected that the incorporation of these principles will lead to an increase in the acquisition of
specialized services. Concerning these dimensions, it is possible to consider information extracted from the
Brazilian Annual Industrial Survey (PIA-IBGE). Considering the innovative efforts, it is possible to connect
the diffusion of the principles related to the "paradigm" of Industry 4.0 to the intensification of innovations in
the different sectors. In order to explore this connection, we can consider the differentiation between three
alternatives related to the introduction of "process innovation" mentioned in the Brazilian Innovation Survey
(PINTEC-IBGE): 1) Method of manufacturing or producing new or significantly improved goods or services;
2) Logistic system or new or significantly improved delivery method for its inputs, goods or services; 3) New
or significantly improved equipment, software and techniques in production support activities, such as:
Production planning and control, performance measurement, quality control, purchase, maintenance or
computing / IT infrastructure. In addition to the "process innovations", it is also intended to consider the
diffusion of "organizational innovations" potentially associated with a greater dissemination of the mentioned
principles, considering the following alternatives chosen by PINTEC-IBGE: 1) New management techniques
for improve work routines and practices, as well as the use and exchange of information, knowledge and
skills within the company; 2) New methods of work organization to better distribute responsibilities and
decision-making power; 3) Significant changes in marketing concepts / strategies. In addition, it is also
intended to consider three particular types of innovative spending carried out by the companies: 1)
Acquisition of software; 2) Acquisition of machinery and equipment; 3) Training. Finally, we can also
consider the importance of the impacts of innovations, with particular emphasis on process innovations,
considering the following alternatives of impacts: 1) Increase in production capacity or service provision; 2)
Increased flexibility in production or service provision; 3) Reduction of costs of production or services
rendered; 4) Reduction of labor costs; 5) Reduction of consumption of raw materials.
Regarding the skills and competence of the workforce the proposed analysis also contemplates an
analysis of the evolution of occupations that would potentially be more directly related to the dissemination of
those principles to the industrial environment as a whole. In order to analyze this aspect, a set of "families" of
occupations defined by the Brazilian Code of Occupations (CBO) could be selected. Thus, from a set of 599
"families" of occupations, 35 "families" could be selected in a preliminary way, which are listed in Table 3.
The analysis of the evolution of the number of workers linked to those occupations by the different industrial
sectors will be carried out based on information extracted from the Brazilian Annual Social Information
Survey about Employment and Wages (RAIS- MTe) data, approached through additional cuts that permit a
more detailed analysis of the evolution of these capacities in the different sectors, such as: 1) size of
establishment; 2) geographical location; 3) age and formal qualification the workers in those occupations.

15
 Table 3 - "Families" of Occupations Related to Industry 4.0 - Jobs in 2015
Families of Occupations Manufacture Total
1234: SUPPLY AND RELATED DIRECTORS 449 2.035
1236: DIRECTORS OF INFORMATION TECHNOLOGY 242 2.814
1416: MANAGERS OF OPERATIONS OF SERVICES IN COMPANY OF TRANSPORTATION AND LOGISTICS 7.361 43.316
1424: SUPPLY AND RELATED MANAGERS 7.885 29.411
1425: INFORMATION TECHNOLOGY MANAGERS 4.539 38.905
2021: MECHANICAL ENGINEERS 1.382 2.370
2032: ENGINEERING AND TECHNOLOGY RESEARCHERS 4.066 10.455
2122: COMPUTER ENGINEERS 764 6.872
2123: COMPUTER SPECIALISTS 2.016 21.489
2124: COMPUTER SYSTEMS ANALYSTS 24.110 285.588
2143: ELETROELETRONIC AND RELATED ENGINEERS 8.813 35.665
2149: INDUSTRIAL, PRODUCTION AND SAFETY ENGINEERS 25.898 41.879
3001: TECNICOS IN MECATRONICA 2.594 4.801
3003: TECHNICIANS IN ELECTROMECHANICS 6.102 13.221
3131: TECHNICIANS IN ELECTRICITY AND ELECTROTECHNICAL (COVALIDACAO 3131) 31.206 102.409
3132: TECHNICIANS IN ELETRONICA 30.301 142.582
3133: TELECOMMUNICATIONS AND TELECOMMUNICATIONS TECHNICIANS 1.219 57.945
3134: CALIBRATION TECHNIQUES AND INSTRUMENTATION 6.489 17.582
3135: PHOTONIC TECHNICIANS 138 2.630
3141: MECHANICAL TECHNICIANS IN THE MANUFACTURE OF MACHINES, SYSTEMS AND INSTRUMENTS 34.938 71.455
3144: MECHANICAL TECHNICIANS IN MAINTENANCE OF MACHINES, SYSTEMS AND INSTRUMENTS 12.534 28.080
3171: PROGRAMMING TECHNICIANS 7.781 69.850
3172: TECHNICIANS IN COMPUTER OPERATION AND MONITORING 5.441 86.425
3722: OPERATING TECHNICIANS OF DATA TRANSMISSION MACHINES 286 6.694
7301: MONITORING SUPERVISORS AND ELECTRONIC INSTALLATIONS 5.789 9.453
7311: ELETRO-ELECTRONIC EQUIPMENT FITTINGS 93.456 121.348
7401: SUPERVISORS OF PRECISION MECHANICS AND MUSICAL INSTRUMENTS 549 990
7411: PRECISION INSTRUMENT MECHANICS (EXCEPT TECHNICAL) 3.994 9.031
7811: INDUSTRIAL ROBOT OPERATORS 979 1.086
9113: MAINTENANCE MECHANICS FOR INDUSTRIAL MACHINES 136.258 199.383
9151: TECHNICAL MAINTENANCE AND REPAIR OF MEDICAL AND PRECISION INSTRUMENTS 1.667 3.677
9501: SUPERVISORS OF MAINTENANCE ELETRO-ELETRONICA INDUSTRIAL, 3.871 13.940
9503: ELECTROMECHANIC MAINTENANCE SUPERVISORS 4.496 7.210
9511: ELECTRICIANS-ELECTRONICS OF MAINTENANCE 42.952 109.846
9513: INSTALLERS AND MAINTENERS OF ELECTRONIC SECURITY SYSTEMS 556 14.322
Sub-total 521.121 1.614.759
Total 7.426.000 48.060.807
Source: RAIS- MTe (2015)

Table 4 presents a summary of the dimensions to be contemplated in the analysis - related

respectively to the process of productive modernization, to the innovative efforts and to the profile of workers
occupations of industrial companies operating in different sectors - the indicators to be considered and the
sources of information to be used. The analysis to be elaborated focuses on the inter-sectorial differences
observed in the evolution of these indicators, trying to evaluate in which industrial sectors the diffusion of the
principles related to the "paradigm" of Industry 4.0 is more advanced and in which the process progressed
more rapidly in the period 2007-2015. The option for this period of analysis is based on operational reasons,:
1) the availability of PIA-IBGE information according to a homogeneous sectoral cut; 2) the availability of
information on homogeneous occupational categories (CBOs) for that period provided by the RAIS-MTe; 3)
the availability of three "rounds" of PINTEC-IBGE based on a homogeneous inter-sectorial cut of the industry
to evaluate the evolution of the innovative efforts (2008, 2011 and 2014).

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 Table 4 - Dimensions contemplated in the analysis, Indicators and Sources of Information
Dimension Indicators Source Períod
Acquisitions and write-offs of property, plant and equipment - Industrial machinery PIA-IGE 2007-2014
and equipment
Expenses - Maintenance and repair services of machinery and equipment linked to PIA-IGE 2007-2014
production provided by third parties (including parts and accessories, when provided
1) Investments oriented to by the service provider)
productive modernization Expenses - Industrial services provided by third parties (other companies or PIA-IGE 2007-2014
freelancers)
Expenditures - Services rendered by third parties (computer science, auditing, law, PIA-IGE 2007-2014
consultancy, cleaning, surveillance, maintenance of real estate and equipment not
linked to production, etc.)
Process innovation - Method of manufacturing or producing new or significantly PINTEC 2008, 2011, 2014
improved goods or services
Process innovation - Logistic system or new or significantly improved delivery method PINTEC 2008, 2011, 2014
for your inputs, goods or services
Process Innovation - New or significantly improved equipment, software and PINTEC 2008, 2011, 2014
techniques in production support activities
Organizational innovations - New management techniques to improve work routines PINTEC 2008, 2011, 2014
and practices, as well as the use and exchange of information, knowledge and skills
within the company
Organizational innovations - New methods of work organization to better distribute PINTEC 2008, 2011, 2014
2) Innovative Efforts responsibilities and decision-making power
Organizational innovations - Significant changes in marketing concepts / strategies PINTEC 2008, 2011, 2014
Invoicing - Machinery and equipment PINTEC 2008, 2011, 2014
Innovative Costs -Softwares PINTEC 2008, 2011, 2014
Innovative Expenditures - Training PINTEC 2008, 2011, 2014
Impacts of innovation - Increase in production or service capacity PINTEC 2008, 2011, 2014
Impacts of innovation - Increased flexibility of production or provision of services PINTEC 2008, 2011, 2014
Impacts of innovation - Reduction of production costs or services provided PINTEC 2008, 2011, 2014
Innovation impacts - Reducing labor costs PINTEC 2008, 2011, 2014
Impacts of innovation - Reduction of consumption of raw materials PINTEC 2008, 2011, 2014
3) Skills and Competences Families of "occupations selected from the Brazilian Code of Occupations (CBO) RAIS -MTe 2007-2014
of Workers
4) Productivity VTI (Value Added) per Worker PIA-IGE 2007-2014

In addition to the analysis of the inter-sectorial differences regarding the factors that would condition
the diffusion possibilities of the principles related to the "paradigm" of Industry 4.0, it is also intended to
advance in another important issue. Specifically, the analysis would try to assess whether industrial sectors
in which the diffusion of the principles Industry 4.0 is more intense, or whether those principles has
progressed more rapidly over the period considered, have a superior performance in terms of productivity
and innovation. This evaluation will be carried out based on two procedures. The first tries to correlate
indicators related to the "diffusion" of the principles of the Industry 4.0 to synthetic indicators of productivity
and innovative performance extracted, respectively from PIA-IBGE and PINTEC-IBGE. In the case of
productivity a measured based on the Industrial Manufacturing Value Added (VTI) per worker will be
considered, while in the case of innovative performance we intend to use some "proxies" based on a
combination of innovation rates and of the "quality" of the innovations generated (new products and
processes "for the market" or "for the sector").
The second procedure would comprise an econometric exercise, through which we intend to discuss
the relationship between the productive performance (labor productivity) and the efforts of different sectors
towards the adaptation to the principles of the "paradigm" of Industry 4.0, considering the three dimensions
previously mentioned - productive modernization, innovative efforts related to process and structure of
competences of the workforce. In this exploratory empirical exercise, we intend to use an econometric
methodology based on the application of two models, one more simplified (Cross-Section Analysis) and the
other more elaborated (Panel Data Analysis). In cross-section model the dependent variable would be the
labor productivity for each company in 2014 as the explanatory variables contain variables associated with
the aforementioned three dimensions. In the Panel Data Model, the focus would be the relationship between
the effort of adaptation to the principles of "paradigm" Industry 4.0 and the performance of the Brazilian
manufacturing industry, considering a panel of companies extracted from the last three editions of PINTEC
for the years 2008, 2011 and 2014.
In these sense, the expected results from this second part of analysis comprise: i) the mapping of
investments in different sectors directed to the modernization of fixed capital specifically in machinery with
advanced technologies, advanced systems of data and process management, compatible and of other types
of expenses compatible with the principles of Industry 4.0; ii) analysis of the occupation profile of the workers
distributed by the various sectors of the industry, with emphasis on the skills and competences required to
perform in this new model of industrialization; iii) the mapping of process and organizational innovations in
different sectors, as well as particular types of innovative spending and innovation impacts that potentially
may indicate a greater commitment of business and industry to the principles related to the "paradigm" of the
Industry 4.0; iv) an evaluation of the correlation established between indicators of "diffusion" of the principles
of the Industry 4.0 and some synthetic indicators of productivity, including an econometric exercise
discussing the relations between productive performance (labor productivity) and the efforts of the different
sectors towards of compliance with the principles of the "paradigm" of Industry 4.0.
17
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