How ´smart machines´ transform the Austrian economy

Technological progress in robotics and artificial intelligence set the stage for a stream of radical innovations that have the potential to trigger a Fourth Industrial Revolution (IR4.0): Smart machines integrated into cyber-physical systems (CPS) allow autonomous interaction between the physical and the digital world and facilitate fully automated production processes. There are clear signs that CPS may become the next general purpose technology (GPT): a technological breakthrough that can be used for a wide range of applications and thus be employed in virtually all sectors of the economy, eventually causing profound structural change and spurring productivity growth. Given the potential of smart machines and their integration into CPS, advances in these technologies very likely also imply substantial effects on the level and structure of employment, as new skills are required and some occupations may become obsolete. Moreover, the transition to the new industrial era depends on the capacity of an economy to adapt to and to diffuse new technologies and therefore on its system of technology diffusion (STD). The latter plays a crucial role for small open economies, such as Austria, that acquire technological innovations to a great extent from abroad. Yet, its relevance has hardly been addressed in the scientific community. Last but not least the role of the public sector is of great importance, since the degree of public intervention and the type of policy measures can be expected to have profound effects on the capacity to develop and absorb new technologies. This project aims at studying the economic potential and challenges related to the diffusion of smart machines for Austria. By means of a combination of methodological and empirical studies, it scrutinizes Austrias readiness for IR4.0. In Task 1 of the project we investigate trends in the Austrian labour market pointing at the upcoming wave of automation. Results will help to identify potential patterns of skill and job mismatches in Austria and provide the basis for developing the contours of new policies and strategies in the field of education and vocational training. In Tasks 2 and 3 we extend the analysis to other, innovation-leading countries. Task 2 compares Austrias STD to these economies and develops an indicator of the capacity to absorb and diffuse new technologies which takes into account e.g. innovative activities, sectoral linkages etc. Studying the performance of this indicator over time allows one to draw conclusions on future innovation policy design. Finally, in Task 3 the focus is on the institutional and policy framework and in particular on the role of public sector organisations in promoting the development and diffusion of smart machines. The project topic is highly relevant with regard to the potential of IR4.0 and the related challenges, risks and chances for economic development in Austria.

The project SMART investigated Austria's readiness for the Digital Revolution from a systemic perspective addressing (1) labour market implications of smart technologies, (2) the transformative capacity of socioeconomic systems in response to technological change, and (3) the organisational and policy framework within which smart technologies evolve. As regards the labour market implications we find that, first, within a theoretical stock-flow consistent dynamic systems approach, process and product innovations and their different effects on productivity, needs, and expectations add a potential source of instability to the economic system lead to off-equilibrium growth paths. Second, in contrast to most of the current labour market polarization literature, our empirical analysis of Austrian vacancy data shows that there is a trend of increasing relative importance of medium-high-skills and high-skills. Third, in order to assess the "readiness" of the Austrian labour force for the new era, we show in terms of OECD survey data from 2011/2012 that socio-economic and gender differences regarding digital problem-solving skills diminish when controlling for ICT engagement in everyday life, indicating that they are "learning-by-doing" skills. Regarding the transformative capacity of socioeconomic systems in response to technological change, we develop a new tool to assess the readiness of a country's socioeconomic system and analyse the structural dynamics of fifty (semi-) industrialized countries. Our structural readiness index complements conventional metrics of socioeconomic performance (such as the GCI) and extends the "Beyond GDP" research agenda. Moreover, responding to current international policies (i.e., the Agenda 2030 and the Paris Agreement), we study the relationship between digitalisation and sustainability with special reference to the role of the entrepreneurial state in this. Finally, we study the role of social responsible public procurement for safeguarding labour and social standards in global IT supply chains. This opens up an exciting new research field in the area of development economics. Regarding the organisational and policy setting, we focus on the European framework program Horizon 2020 and develop a new methodological approach to construct a collaboration network that sheds light on the role of different types of innovative actors. It also reveals the power relations characterising innovative activities under Horizon 2020. With regard to the policy problem dubbed "valley of death" we study mechanisms of how policy-based social technologies help to mitigate or overcome complex problems that disturb the innovation process. Finally, we refine the notion of "policy-based social technologies" and develop an analytical framework that allows us to study innovation policy as an endogenous and dynamic process. In addition, the project team edited the "Routledge Handbook of Smart Technologies: An Economic and Social Perspective", comprising 33 chapters on social, economic and sustainability aspects of the digital transformation, which will be published in February 2022.