One in Ten Companies Invested in 4.0 Technologies During the COVID-19 Pandemic

Due to the COVID-19 pandemic, only one in ten companies made additional investments in so-called 4.0 technologies, i.e. computer-based intelligent technologies such as cloud computing systems, when purchasing office and communication equipment. This is shown by the first analyses of the new “Arbeitswelt 4.0” company survey conducted jointly by the Institute for Employment Research (IAB), ZEW Mannheim and the Institute of Labor Economics (IZA), published on Thursday.

Most importantly, these investments widened the digital divide: Of the nearly 70 per cent of companies that had never made such investments, only 2.5 per cent purchased 4.0 technologies. In contrast, 24.8 per cent of the nearly 20 per cent of companies that had some prior experience with such technologies and 27.3 per cent of the slightly over 11 per cent of companies with extensive prior experience invested in additional 4.0 technologies. On average, the pandemic caused the share of office and communication equipment based on 4.0 technologies to increase by 2.6 percentage points for all companies. This pandemic-induced digitalisation boost amounts to 1.7 percentage points for companies with no prior experience, 2.9 percentage points for companies with some prior experience, and 4.0 percentage points for those with extensive prior experience. “We only see a pandemic-driven digitalisation boost in terms of state-of-the-art digital technologies in companies that had already invested in these technologies before. The technological gap between frontier firms and laggards has thus widened further as a result of the pandemic. Technological laggards will therefore find it increasingly difficult to maintain their competitiveness”, says Professor Melanie Arntz, deputy head of the ZEW Research Unit “Labour Markets and Social Insurance”.

As companies mainly invested in technologies that enable employees to work from home, the pandemic-related digitalisation boost also turned out to be significantly stronger in companies where a larger share of work could be done from home. While the share of 4.0 technologies in companies with low remote working potential increased by an average of 1.7 percentage points during the pandemic, it doubled on average in companies with high remote working potential. If companies with a high potential for remote work already had experience with digitalisation, the share of 4.0 technologies even grew sixfold as a result of the pandemic.

The results are based on initial analyses of the second wave of the IAB-ZEW-IZA Labour Market 4.0 Establishment Survey, a representative company survey funded by the Federal Ministry of Labour and Social Affairs. In the survey, which was conducted between August 2021 and June 2022, almost 3,000 companies were asked about their investments between 2016 and 2022.