A business transition model for sustianability-oriented industrial innovation and feedback on employment, inequality and inflation

This paper presents the IN4.0-SD, a novel system dynamics model to capture the dynamic interplay of industrial innovation, inequality, and inflation. The IN4.0-SD is a closed system economic model composed of three agents: traditional factory, licence-business, and household. Licence-business and traditional factory are both assumed to supply one product to the economy and fundamentally differ among each other in their business model. While the traditional factory produces and sells capital goods making revenue out of sales, licence-business detaches the concept of production from sales moving toward an intangible economy, charging for a fee licence of their tools that can be distributed via a network economy. Licence-business is assumed to be a key driver for change in the assets structure in both the traditional and licence-business companies, both in terms of productivity, efficiency, and labour requirement for operations. Simulations show the level of flexibility of the model in addressing a variety of scenarios, playing at the threshold of technology development, inequality rise, massive unemployment and providing an archetype for sustainability type models. The model can provide a good base when applied to sustainability type scenarios that deal with energy transitions, climate change mitigation, and socio-technical transformations.