Knowledge sources for Industry 4.0 technologies in European regions: the role of inward FDIs

This study investigates the extent to which inward innovative FDIs can contribute to European regions’ potential to access external knowledge useful for the development of Industry 4.0 (I4.0) technologies. By contributing to recent research on regional I4.0, we maintain that incoming multinational companies enable regions to access knowledge generated abroad that is usable for local I4.0 inventions. Using citation data about I4.0 patent applications and innovative FDIs, we estimate a gravity model that supports this idea. The knowledge base of I4.0 technologies developed in European NUTS 3 regions positively correlates with innovative inward FDIs. The correlation is driven by both greenfield FDIs and cross-border M&As, with FDIs originating outside Europe providing the greatest contribution to knowledge transfer. The findings are consistent with the relative weakness of Europe in the development of I4.0 technologies and suggest that place-based FDI policies could help European regions to overcome this gap.