□ Smart factories have been found to enhance the productivity of the overall production process, proving to be an appropriate policy as a key strategy for domestic manufacturing innovation. However, to maintain its effectiveness even when the scale and recipients of policy support are expanded, there should be improvements in the policy details and action plans. Above all, making factories smart requires not only the adoption of relevant technologies, but also proper management practices and organizational operations necessary to utilize the new technologies. The government should place the policy priority on helping firms to align workers‘ incentives with the technological change. It is also necessary to smartize the governance system of the overall manufacturing innovation strategy which include smart factories.
- The scale of the smart factory fostering policy, a key element of Korea's manufacturing innovation strategy, is gradually expanding. It is time to check the effectiveness of the policy.
- This study provides policy implications by measuring the level of smartness at the factory-level, analyzing economic effects from enhanced smartiziation, and examining factors that can facilitate the smartization.
- Smart factory is a factory in which workers and equipment exchange information and thus can make better decisions.
- Recent technological progress is drawing much attention to smart factories, but adopting the technology is a way of helping factories become smarter, and not directly transforming them into a smart factory.
- The level of smartization in a factory can be measured based on their levels of system interconnection and data sharing and utilization.
- According to the analysis, the level of smartization in Korean firms is low overall with a huge gap between factories.
- Smartization is found to have varying effects on factories’ performance depending on the type of production process, but in general, smartization helps to significantly improve productivity.
- The US-China trade conflict could directly/indirectly reduce Korea's exports, which in turn, could lead to a fall in GDP.
- The nature of smartization is a fundamental transformation of the manufacturing system, using data as a proxy, and not replacing human labor through automation.
- Automation is likely to curtail labor demand while smartization is found to have different effects on different occupations. In particular, the demand for technicians specialized in process management is not expected to decrease.
- Responsive measures should be developed to support occupations that will likely experience a contraction in employment amid factory smartiziation.
- The adoption of technologies for smartization can be helpful only when it is well aligned with workers’ incentives.
- Technological and organizational factors that determine the level of smartization are complementary, meaning that it would be difficult to smartize by focusing on just one factor.
- To make the policy work more effectively, companies should be provided with management training and consulting support so that they can prepare for technological change. It is recommended support programs for consulting, training and human resource development are systemized.
- The government’s support system needs to be smartized to enhance the efficiency of support and to provide companies with more practical information.
- Effective educational and retraining programs should be provided, targeting occupations that will likely face a decrease in demand, through cooperation between large enterprises and SMEs and between suppliers and users.
- A public-private-academic network platform holding real authority should take the driving role in developing manufacturing innovation strategies and responding to the coming changes.