As automation reshapes global manufacturing, developing countries may have more to gain than many expect. Research finds that countries do not necessarily have to choose between inexpensive labor and advanced robotics to compete for multinational investment.
In fact, the combination can make them more attractive.
The study, published in the Journal of International Management, found that multinational companies favored lower-wage countries that also had larger stocks of industrial robots. Researchers examined nine years of data, from 2008 through 2016, tracking industrial robot purchases and greenfield foreign direct investment in the global automotive industry.
The results challenge the idea that increased automation will inevitably push manufacturing investment back toward higher-wage developed economies. Instead, robotics can complement the labor-cost advantages of developing countries. Lower-wage countries attracted more foreign investment while requiring fewer additional robots than higher-wage countries — creating what the researchers describe as a “dual advantage.”
Amit (A.J.) Chauradia
The study was co-authored by Amit (A.J.) Chauradia, assistant professor of management at the University of South Florida, along with Pavan Kulkarni and Snehal Awate of the Indian Institute of Technology Bombay.
For policymakers and economic development leaders, the findings point to a practical opportunity: Investments in robotics and production technology can strengthen — rather than replace — the competitive advantage that lower labor costs already provide.
Authors: Pavan Kulkarni and Snehal Awate, Indian Institute of Technology; Amit J. Chauradia, University of South Florida.