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Industry 4.0
The adoption of Industry 4.0 technologies
technologies in SMEs: results of in SMEs

an international study
Lara Agostini and Anna Nosella 625
Department of Management and Engineering,
Received 13 September 2018
University of Padua, Vicenza, Italy Revised 29 April 2019
19 June 2019
Accepted 30 June 2019
Abstract
Purpose – The purpose of this paper is to investigate whether the financial resources invested in advanced
manufacturing technologies (AMTs) and social capital (SC), in terms of the set of internal and external
relationships a firm holds, have a positive effect on the adoption of Industry 4.0 (I4.0) technologies.
Furthermore, it tests whether the organizational context strengthens these relationships.
Design/methodology/approach – The authors used regression models to analyze data collected
through an international survey carried out within the scope of a European project involving six Central
European regions.
Findings – Results show that small- and medium-sized enterprises (SMEs) having stronger internal
and external SC have a higher propensity to adopt I4.0 technologies, and both management support and
absorptive capacity (AC) strengthen these relationships, whereas investments in AMTs within the
manufacturing area and internal SC have a positive association with the intensity of I4.0 adoption.
However, in presence of a high level of management support and AC, the relationship between external SC
and I4.0 adoption becomes positive and significant. Management support also moderates the impact that
investments in AMTs in the manufacturing area and internal SC have on the intensity of adoption of
I4.0 technologies.
Originality/value – This paper is one of the first to investigate the context of SMEs that, having fewer
resources, face some difficulties in exploiting the potential of I4.0 revolution. Moreover, it adopts a broad
perspective on the factors that facilitate the adoption of I4.0.
Keywords SMEs, Advanced manufacturing technologies, Social capital, Industry 4.0, Digital technologies
Paper type Research paper

1. Introduction
Companies worldwide are currently being reshaped by the new industrial revolution – the
fourth – also known as Industry 4.0 (I4.0), where traditional manufacturing and production
methods are in the throes of a digital transformation. The concept of I4.0 was initially
introduced in Germany in 2011 (Lu, 2017), referring to the integration of physical objects,
human actors, intelligent machines, production lines and processes across organizational
boundaries, with the aim of realizing a system in which all the processes are integrated and
information is shared in real time (Hozdić, 2015).
The emergence of I4.0 is deeply rooted in the third industrial revolution which is
characterized by rapid developments in information technology (IT), electronics and
digitalization, where advanced manufacturing technologies (AMTs) are at its core. AMTs
are computer-assisted technologies used by industrial companies to produce their
products. They can be described as computer-assisted technologies used to control and
monitor manufacturing activities, bringing greater flexibility, shorter production cycles,
faster responses to changing market demands, better control and accuracy of production
processes (Caputo et al., 2016). Literature (Durão et al., 2017) shows that the adoption of
AMTs in connected environments triggers the fourth industrial revolution because it
Management Decision
Vol. 58 No. 4, 2020
This research has been supported by the University of Padua (Developing an assessment tool to pp. 625-643
support Lean Transformation in SMEs), and by the Interreg EU Project called InnoPeer AVM © Emerald Publishing Limited
0025-1747
(CE1119). DOI 10.1108/MD-09-2018-0973
MD allows the receipt of different information from various sources and the production
58,4 of few items in a reduced time. Therefore, the shift to the fourth industrial revolution
seems to be enabled by a factory that has already passed through the challenges of the
third industrial revolution, since AMTs can facilitate the adoption of cyber–physical
systems (CPS), “defined as transformative technologies for managing interconnected
systems between its physical assets and computational capabilities” (Lee et al., 2015),
626 that are at the core of I4.0.
On such basis, exploiting the potential of I4.0 is challenging, particularly for small- and
medium-sized enterprises (SMEs), as it requires significant investments in technologies.
However, this is not enough because also IT competences, a strategic vision of the top
management and an organizational context ready to support the transformation process
and receive the benefits led by these technologies need to be considered (Balasingham,
2016). Looking at the SME context, after 2011, on one the hand, they have experienced a
decline in the availability of resources due to the economic crisis and the banking credit
crunch. On the other hand, the increased pervasiveness of the I4.0 revolution, which allows
the improvement of manufacturing processes and the development of smart products, has
amplified the dynamism and the complexity of SME market and technological environment
(Neirotti et al., 2017), increasing their competitive pressures, altering market equilibria and
changing industry structure.
For these reasons, nowadays governments are developing some policies and measures to
support firms in their digitalization path both financially through funds and structurally
through institutional actions at the system level meant at fostering the relationship between
the company and the external actors (such as intermediaries, universities and innovative
firms) as well as training programs. These policies are also addressed to SMEs that, having
fewer resources, face some difficulties in exploiting the potential of I4.0 revolution. Recently,
SMEs, thanks also to these policies promoted by governments, have been making some
investments in AMTs and, to this purpose, they have established a set of relationships with
external partners, not only suppliers and customers, but also technology providers and
innovative organizations. However, the literature partially ignores the effects that these
actions undertaken by SMEs may have on the real adoption of I4.0 technologies.
Furthermore, there are not so straightforward insights on the role that the organizational
context plays in favoring the adoption of I4.0 technologies in SMEs (Tortorella and
Fettermann, 2017).
To bridge these gaps, the aim of this paper is twofold: the former is to understand
whether the financial resources SMEs have invested in AMTs and their set of internal and
external relationships (that could be referred to by recalling the concept of social capital
(SC) Hitt and Duane, 2002) have a positive effect in the adoption of I4.0 technologies; the
latter is to test whether the organizational context strengthens the relationship between
the financial resources and SC and the adoption of I4.0 technologies in the context of
SMEs. To this end, we carried out an international survey addressed at a sample of SMEs
to test our set of hypotheses.
The remainder of the paper is organized as follows: a literature overview on the
antecedents of the adoption of I4.0 technologies and moderators are presented, followed by
the methodology and data analysis; finally, results are discussed with academic and
practical implications.

2. Literature review and hypotheses

Increased flexibility in manufacturing, mass customization, smart products, better quality
and improved productivity are among the most cited benefits that can be reaped by the new
digital industrial revolution that is characterized by the merger of digital and physical
workflows. At the heart of I4.0, there are CPS where the internet and supporting
technologies (e.g. embedded systems) serve as pillars to integrate physical objects, human Industry 4.0
actors, intelligent machines, production lines and processes across organizational technologies
boundaries to form a new kind of intelligent, networked and agile value chain. in SMEs
I4.0 is enabled by the application of AMTs “to bring new values and services for
customers and the organization itself” (Khan and Turowski, 2016, p. 16). In particular,
AMTs, intended as a cluster of technologies hardware based (e.g. computer numerical
control, flexible manufacturing systems and industrial robots) and software based 627
(e.g. computer-aided design, bar coding automatic identification), linked through advanced
computing technology, are an important antecedent of I4.0. Indeed, there are few studies
(e.g. Maghazei and Netland, 2017) prompting that AMTs should be implemented to exploit
the potential of I4.0 revolution successfully. It seems that “an automated production system
of people, machines and tools for the planning and control of the production process”
(Maghazei and Netland, 2017, p. 136) is an important antecedent of I4.0; just to make an
example, Internet of Things (IoT) integrates “advanced manufacturing technology and
modern management technology to realize the dynamic perception, intelligent processing
and optimal control of manufacturing system” (Huang et al., 2017). Put in other words, the
key element that characterizes this new industrial revolution is the change in the
manufacturing systems allowed by the integration of information and communication
technologies (ICTs), IoT and machines in CPS (Dalenogare et al., 2018).
Consequently, to exploit the advantages of I4.0 entirely, companies need to invest in
equipment, ICTs and AMTs. A huge amount of investments, which are supposed to reach
€140bn annually in Europe until 2020, is required to embrace the fourth industrial revolution
(Davies, 2015). These financial efforts can be particularly overwhelming for SMEs that often
do not have the resources required to pursue these investments; the recent contribution by
Moeuf et al. (2018) shows that carrying out I4.0 projects in SMEs is still a cost-driven initiative
and the business transformation advantages are still not demonstrated. Lately, some studies
(Sommer, 2015) have outlined that SMEs need more support by institutions in comparison to
larger companies, since they are less skilled in coping with the financial, technological and
staffing challenges. For example, industries with high production volumes can exploit the
benefits of economies of scale and, thus, they are more willing to face larger initial investments
to implement I4.0 processes (Deloitte, 2015).
These results have been confirmed also by The Digital Business Readiness study from
2015 that draws the conclusion that many enterprises are lacking resources to promote
digital change internally. Along this vein, Davies (2015) outlines that one of the factors that
negatively affects the success of digitalization is related to the lack of financial resources.
The general conclusion achieved by the Federal Ministry of Education and Research (2016)
is that, whereas the digital transformation is particularly beneficial for SMEs, large
investments to reap the rewards of I4.0 are needed. In particular, as previously outlined, it
seems that some investments in AMTs should be realized to create the right context that can
both facilitate the adoption of CPS and to achieve all the benefits of I4.0 revolution. Based on
these insights, the first hypothesis is formulated:
H1. The financial resources invested in AMTs will be positively associated with SME
adoption of I4.0 technologies.
The full digital integration and automation of manufacturing processes, embracing the vertical
and horizontal dimensions, require that employees have a broader process scope and, to
understand the relations between the processes and information flows, they should cooperate
with external actors, finding appropriate solutions for particular problems (Erol et al., 2016). Put
in other words, the availability of information along the value chain and the computational
systems with their increasing connectivity and capabilities increasingly call for new cross-
domain collaborations (Wang et al., 2015). In particular, in the context of SMEs, collaboration is
MD an imperative: “connecting with partners, achieving autonomous processes, synchronizing
58,4 flows and customising products,” as showed by Moeuf et al. (2018), are becoming part of the
strategy of SMEs since they often lack investments in internal R&D activities and in
capabilities to manage complex computer solutions.
In this context, also the advent of IoT technology, which allows the creation of new
business models (Szozda, 2017) where values are created within a network of units,
628 contributes to shift the focus from the single company to the whole ecosystem, so that all
involved parties along the supply chain improve their processes to maximize benefits for the
end customers (Atzori et al., 2010). On the same line, to exploit the potential of 3D printing
technologies fully, an integration along supply chain is recommended since it allows
lowering the costs, improving the ability of mass customization and reducing the inventory
(Chan et al., 2018).
Nevertheless, the new industrial revolution calls for collaboration not only with suppliers
and distributors, but also with technology and infrastructure providers such as telecoms
and internet service providers (Davies, 2015). As a recent report of McKinsey&Company
(2016) outlines, companies seem to show uncertainty and a lack of knowledge related to both
whether I4.0 applications are to be made internally and/or externally, as well as about
suitable providers. Furthermore, I4.0 is affecting the relationship with technology providers,
moving from a single-provider model to a set of integrated technology providers.
To manage this new context successfully, manufacturers need a well-developed portfolio of
potential providers and a strong partner management approach (McKinsey&Company,
2016). It seems clear that to take advantage of the potential of I4.0 technologies employees,
who are embedded in a social context, need some soft skills related to the ability “to
communicate, cooperate and to establish social connections and structures with other
individuals and organizations” (Erol et al., 2016, p. 14), beyond technical skills. In particular,
employees are asked to collaborate not only with external actors, but also with colleagues
within the boundaries of their own company, where there is no place for the traditional
barriers that have separated the various internal functions so far. Cooperation between
experts from operations (who have the technical domain knowledge), experts from IT (who
hold the knowledge on advanced analytics and the company’s IT architecture and
infrastructure), and experts from business (who know how to link investments to a clear
business case) and managers who set the digital strategy is a fundamental component of an
I4.0 strategy execution (McKinsey&Company, 2016). The challenges posited by I4.0 and its
complexity require employees, on the one hand, to have an increased propensity toward
building and maintaining a network of experts and cooperating with them in finding
appropriate solutions for particular problems (Erol et al., 2016). On the other hand, always
referring to employees, a recent article points to the capacity of working in teams as well as
the social competences as fundamental skills necessary to cope with the fourth industrial
revolution successfully (Sousa and Rocha, 2019).
Hence, the fruitful adoption of these technologies requires a social setting where
heterogeneous interdisciplinary and inter-organizational teams, with the ability to
communicate and interact, are involved. From a socio-technical perspective, recent
contributions (Brettel et al., 2014; Dalenogare et al., 2018) outline how the adoption of the I4.0
emerging technologies is not rid of changes, requiring a new organization of work.
All in all, the previous insights support the idea that a firm SC, intended as “the
relationship between individuals and organizations that facilitate action and create value”
(Hitt and Duane, 2002), both in its internal dimension and external dimension, is a significant
antecedent of the adoption of I4.0 technologies. In particular, in this study we adopt the
approach by Cuevas-Rodríguez et al. (2014, p. 267) stating that “internal SC will refer to the
linkages among individuals or groups within the organizations, while external SC will
represent the external linkages to other firms and institutions,” which is in line with Hitt and
Duane (2002) and with the distinction between intrafirm and interfirm relationships by Industry 4.0
Adler and Kwon (2002). Based on these insights, the following hypotheses are formulated: technologies
H2a. Internal SC will be positively associated with SME adoption of I4.0 technologies. in SMEs
H2b. External SC will be positively associated with SME adoption of I4.0 technologies.
Top management is in charge of providing the company future direction, nurturing its values
and beliefs, and giving the firm a sense of identity (Hart, 1992); not only managers spearhead 629
the company, but they also guide employees’ behavior. Past research has proved that
management support is fundamental in the adoption of the new technologies (e.g. Premkumar
and Roberts, 1999), in the success of the innovative projects (Young and Jordan, 2008) and in
the integration of technologies into business processes, which in turn facilitates the adoption
and usage of cloud computing tools (Ooi et al., 2018). The last consideration suggests what
previous literature (Ragu-Nathan et al., 2004; Tarofder et al., 2010) has already demonstrated,
that is that management support is crucial in favoring information system adoption and
usage. Furthermore, Muninger et al. (2019) demonstrate that top managers who pursue
digitization of the company also invest in innovation, digital infrastructure and social media.
Once technological investments have been made, managers act as direct facilitators of their
successful adoption (Ooi et al., 2018), since they are committed to creating a healthy working
environment, sponsoring the importance of these investments through the different functions
and pushing employees to become more skillful at using these technologies. Furthermore, the
intrafirm and interfirm nature of these investments, that often require collaboration among
different departments, as well as along the supply chain, makes the role of managers even
more important. Indeed, they act as facilitators of social processes, bringing down the “sky-
high vision of I4.0 to the shop floor” (Erol et al., 2016, p. 15); they promote a climate of
collaboration, pushing employees to put themselves in the shoes of collaborators from other
departments. Evolving digital technologies allows new ways to collect and analyze data,
which might contribute to improve company’s performance, but to achieve this result
managers need to change their decision-making culture and to increase the degree of
collaboration in the decision-making process (Frisk and Bannister, 2017).
Nevertheless, the successful adoption of I4.0 technologies often calls for a trustful
cooperation not only within the boundary of the company, but also with external actors. This
is the case for example of the new customer-oriented business models based on innovative
hybrid products and service solutions (Arnold et al., 2016) or a network oriented business
model where “the horizontal and vertical integration of the value chain and the related
interoperability expand firms’ traditional boundaries due to the organization and the
stakeholders’ network” (Ibarra et al., 2018, p. 7). The adoption of these new business models
requires the capability of partnering with external actors, and it can only be achieved by
involving the top management who is in charge of coordinating and operationalizing
interdisciplinary communication between intra- and inter-firm departments and stakeholders
(Kiel et al., 2017). Literature (Saberi et al., 2019) has also demonstrated that top management
support is fundamental in the successful implementation of any supply chain practices, which
is the organizational prerequisite for the adoption of digital technologies: for example, lack of
management commitment in the supply chain would impede the introduction of blockchain
technology which requires investing in new hardware and software for information collection
as well as new roles, responsibilities and expertise.
Based on these insights, we formulate the following hypotheses, where management
support acts as a moderator between our independent variables (the financial resources and
SC) and I4.0 adoption:
H3. Management support strengthens the relationship between financial resources
invested in AMTs and SME adoption of I4.0 technologies.
MD H4a. Management support strengthens the relationship between internal SC and SME
58,4 adoption of I4.0 technologies.
H4b. Management support strengthens the relationship between external SC and SME
adoption of I4.0 technologies.
Absorptive capacity (AC) has been defined as the capability that enables firms to effectively
capture, transform, integrate and use the internal and external knowledge to improve their
630 competitive position (Cohen and Levinthal, 1990; Zahra and George, 2002). AC is nurtured
by the prior company’s knowledge and by the effectiveness of its organizational
communication processes, at the point that Liao et al. (2010) sustain that “firms with higher
AC are more likely to succeed in implementing new technologies because they have more
related experiences or have a more effective communications infrastructure.”
This seems particularly important for SMEs that, despite they recur to external
relationships due to the lack of internal resources, regularly struggle with making
purposively good use of them (Agostini and Nosella, 2019).
Furthermore, the adoption of a new technology often poses significant challenges and
barriers to firms, since it requires changes in the organizational processes and
communication, asking for employees’ ability to collaborate (Ooi et al., 2018). Indeed, the
literature (Schilling, 1998; Park et al., 2007) shows not only that the collaboration among
employees and with external actors favors a successful adoption of new technology, but also
that through AC firms expand their knowledge and skill base, improving their ability to
facilitate technology and manufacturing practices adoption.
Just to make some examples, Lin (2014) states that a firm AC is expected to increase the
likelihood and extent of e-supply chain management adoption and Tu et al. (2006) show that
AC is expected to favor the level of time-based manufacturing practices adoption. Finally,
Liao et al. (2010) state that a firm AC positively influences the use of new manufacturing and
technology practices, such as modularity and system integration.
Summing up, we could hypothesize that companies with a higher ability to capture and
use external knowledge can exploit at maximum the potential of their collaborations and
their effect on technology adoption. In other words, the extent to which a firm can transform
and use external knowledge caught by different sources depends on its level of AC; taking
value from this knowledge is fundamental in the process of adoption of new technologies,
where companies, and in particular SMEs, do not have all the required competences in
house. However, a firm AC, is not merely directed to external partners, but it also embraces a
firm ability to process different types of knowledge internally, supporting companies in
improving the flow of internal and external knowledge (Xiong and Bharadwaj, 2011).
Indeed, the successful adoption of the new digital technologies needs employees who are
skilled at working together and sharing knowledge and this effect might be potentiated if
they are also able to integrate their internal knowledge with the valuable external one.
Therefore, based on these insights, the subsequent hypotheses are formulated:
H5a. AC strengthens the relationship between internal SC and SME adoption of I4.0
technologies.
H5b. AC strengthens the relationship between external SC and SME adoption of I4.0
technologies.
Figure 1 depicts the theoretical model that wil be tested.

3. Methodology
3.1 Statistical procedure
Two statistical analyses were conducted: the former utilized logistic regression and
assessed the variables associated with whether or not firms adopted I4.0 technologies.
 Investments in AMTs
H1 Industry 4.0
technologies
in SMEs
Social capital 14.0 technologies
H2a
Internal social capital
H2b
External social capital 631
H3 H4a H4b H5a H5b
Figure 1.
Management Absorptive The research model
support capacity

The latter utilized OLS regression and assessed the variables associated with the intensity
of adoption of I4.0 technologies. This allows evaluating the variables associated with the
adoption of at least one I4.0 technology, usually interpreted in terms of the probability that
an event will occur (i.e. to adopt I4.0 technologies), compared to the adoption of multiple
I4.0 technologies, following the approach used by previous authors (e.g. Dickson and
Weaver, 2011).
To test for the moderating effect of AC and management support, we adopted the group
comparison approach. According to the value assumed by the moderating variable, the
sample was divided into two groups, namely, the “high group,” in which firms register a
level of the moderating variables (i.e. AC and management support) above the mean value,
and the “low group” in which firms register a level of the moderating variables below the
mean value. Two separate regression analyses were then conducted in the groups;
subsequently, the statistical difference between the regression coefficients associated to
each independent variable was tested by means of the Chow test which is a statistical and
econometric test of whether the coefficients in two linear regressions on different data sets
are equal (Chow, 1960).

3.2 Sampling and data collection

I4.0 has been studied much more in the domain of large firms than in SMEs; however, due
to their resource constraints and other peculiarities, issues regarding investments and SC
are particularly relevant for SMEs, at the backbone of European economy, and thus they
become a perfect context of study (e.g. Moeuf et al., 2018). Moreover, Central European
regions, despite heterogeneous in geographical terms as well as in economic and social
term, are facing similar challenges, among which smart manufacturing is one of the
priorities to which the European Union is dedicating specific development programmes[1].
On such basis, to test the hypotheses, an international survey has been carried out
within the scope of a European project called InnoPeer AVM, involving six
Central European regions, namely, Emilia Romagna (Italy), Lower Silesia (Poland),
South Bavaria (Germany), Upper Austria (Austria), Veneto (Italy) and Western
Transdanubia (Hungary). The overall aim of the project is to understand the
dynamics of I4.0 in the manufacturing sector in SMEs of the involved regions and
support the development of I4.0 capabilities of SMEs. These regions represent excellence
within a number of manufacturing sectors, namely, metallurgy, electric and electronics,
machinery and vehicles.
Accordingly, a purposive sampling technique was adopted to identify our potential
respondents. First, companies needed to have a turnover between €2 and 50m. Second, the
companies of the sample had to belong to one of the following manufacturing industry
(according to NACE Rev.2 classification): 25. Manufacture of fabricated metal products,
MD except machinery and equipment; 26. Manufacture of computer, electronic and optical
58,4 products; 27. Manufacture of electrical equipment; 28. Manufacture of machinery and
equipment n.e.c. (not explicitly covered); 29. Manufacture of motor vehicles, trailers and
semi-trailers; 30. Manufacture of other transport equipment. Finally, they needed to have the
headquarter located in one of the investigated regions.
An e-mail containing the description of the project and the link to the online survey was
632 sent to firms respecting these criteria; after two reminders, we finally obtained a total
number of 163 complete answers. Data were collected between January and February 2018.

3.3 Measures and operationalisation

In our survey, we used already validated scales, measured on the basis of a five-point
Likert scale.
To measure the firm adoption of I4.0 technologies (I4.0), we identified the inter-related
I4.0 technologies, as suggested by the Italian Ministry of Economic Development (2016),
following the approach found in the recent article by Tortorella and Fettermann (2018). We
asked firms the level of adoption of each technology ranging from “Not adopted” to “Fully
adopted,” and then, after carrying out the factor analysis, we calculated the mean value of
the level of adoption of all the technologies. A “dummification” of this variable was made to
perform the logistic regression: for each technology, we substitute with 0 answers 1 and 2,
and with 1 answers 3, 4 and 5. Then, if values of all technologies summed to zero, we
attributed 0 to the new variable (I4.0_Y/N), otherwise we attributed 1, which means that the
firm adopted at least one technology.
For investments (INV ), we used the scale indicated by Boyer and Pagell (2000) and we
asked firms the amount of investments the firm made in a number of AMTs, ranging from
“No investments” to “Heavy investments,” in the previous three years. As Table I shows, the
factor analysis distinguishes two factors, i.e. one referred to manufacturing activities
(INV_MAN) and another one to the design activities (INV_DES), in accordance with Boyer
and Pagell (2000).
SC has a twofold dimension, i.e. internal and external. For internal SC (INT_SC),
we adopted the three-item scale used by Subramaniam and Youndt (2005) that reflects the
value embedded in the interactions among employees (Nahapiet and Ghoshal, 1998)
and concerns the quality of such relationships in terms of employees’ knowledge
exchange habits, propensity to collaborate and work in groups (Yang and Lin, 2009).
For external SC (EXT_SC), we asked firms the extent they collaborate with a number of
external sources for innovation (i.e. other firms, intermediaries, universities/research
centers, consultants, ICT providers), ranging from a very low to a very high level,
following Landry et al. (2002).
As far as the moderating variables are concerned, the three-item scale for AC is taken
from Hsu and Fang (2009) and it represents the firm’s ability to search, identify and utilize
external knowledge. Then, the scale for management support (MNG_SUPP) is based on Lin
et al. (2016) and represents the level of willingness of senior staff to support and encourage
the adoption of I4.0 technologies.
We also controlled for firm size, operationalized as the logarithm of the number of
employees and for R&D expenses (e.g. Hambrick et al., 2015; Yanadori and Cui, 2013). This
also allows considering the issue of endogeneity, as suggested by previous research (e.g.
Ebbes et al., 2017; Hult et al., 2018).
Table I exhibits the details of the constructs and associated measurement items together
with the results of the confirmatory factor analysis (CFA) that was performed using SPSS.
In particular, we carried out separate CFAs for the dependent, independent and moderating
variables (see different colors in Table I), in line with the approach used in previous studies
(e.g. Jansen et al., 2006).
 Standard Cronbach’s
Industry 4.0
Items Description loading α technologies
in SMEs
I4.0 Please, rate your present level of adoption of each of the following I4.0 technologies
I4.0_IOT Internet of Things 0.763 0.812
I4.0_CLOUD Cloud computing 0.592
I4.0_CYBER Cybersecurity 0.616
I4.0_BIGDATA Big data and analytics 0.672 633
I4.0_AMS Advances manufacturing solutions 0.665
I4.0_AUGM Augmented reality 0.693
I4.0_ADDIT Additive manufacturing 0.624
I4.0_SIMUL Simulation tools 0.659
INV Please, rate the amount of investments your manufacturing plant has in the following
activities
INV_CAD Computer-aided design 0.961 0.809
INV_CAE Computer-aided engineering 0.887
INV_CAP Computer-aided process planning 0.582
INV_CAM Computer-aided manufacturing 0.700 0.890
INV_ROBOT Robotics 0.662
INV_CONTR_SYST Real-time process control systems 0.881
INV_GT Group technology 0.624
INV_FMS Flexible manufacturing systems 0.652
INV_CNC Computerized numerical control machines 0.660
INV_MAT_HANDL Automated material handling systems 0.719
INV_ENV_CONTR Environmental control systems 0.932
INV_BAR_CODE Bar coding automatic identification 0.758
INT_SC Please, rate the level at which
INT_SC_PROBL Your employees are skilled at collaborating with each other 0.914 0.912
to diagnose and solve problems
INT_SC_LEARN Your employees share information and learn from one 0.917
another
INT_SC_IDEAS Your employees interact and exchange ideas with people 0.935
from different areas of the company
EXT_SC Please, rate the extent you collaborate with each of these external sources for
innovation
EXT_SC_FIRM Other firms 0.816 0.838
EXT_SC_INTERM Intermediaries 0.797
EXT_SC_UNIV Universities/research centers 0.603
EXT_SC_CONSUL Consultants 0.806
EXT_SC_ICT ICT providers 0.826
AC Please, rate the level at which
AC_SEARCH Your employees have the capability to search for external 0.890 0.893
information and knowledge
AC_IDENT Your employees can identify the usefulness of external 0.949
information and knowledge
AC_USE Your employees can effectively and flexibly utilize extant or 0.882
newly acquired knowledge
MAN_SUPP Please, rate the level at which
MAN_SUPP_FIN Senior staffs provide highly support, such as HR and 0.959 0.915
financial resources, to I4.0 technology Table I.
MAN_SUPP_ENC Senior staffs encourage employees to apply I4.0 technology 0.861 Results of the CFA

We evaluated content, construct, convergent and discriminant validity of the measurement

scales. According to Bollen (1989), while content validity is assessed conceptually, construct,
convergent and discriminant validity must be evaluated both empirically and theoretically.
Construct validity was assessed in terms of significance of factor loadings and magnitude of
factor loadings (Mahapatra et al., 2012). An analysis of the loadings indicated that all
MD standardized loadings were greater than 0.5 and highly significant, thus showing convergent
58,4 validity. We further tested for discriminant validity by calculating the correlation among the
constructs. Due to some high values in the correlations, we also calculated the variance
inflation factor (VIF) that resulted all lower than three, a part from AC whose VIF is 3.03, thus
confirming multicollinearity is not a concern.
In addition, Cronbach’s α of the identified constructs is definitely above the threshold
634 value of 0.6 suggested by Nunally (1978) for all constructs, therefore confirming convergent
validity. Table II presents some descriptive statistics of independent variables, whereas
correlations are shown in Table III.
To test for common method bias, i.e. variance that is attributed to the measurement
method rather than the constructs of interest (MacKenzie and Podsakoff, 2012), we
performed two analyses, one during the design and administration of the survey and
one post hoc. First, we selected respondents who have the necessary experience to answer,
we tried to motivate them to answer accurately by explaining why the questions were
important; moreover, we assured respondent confidentiality, which should prevent
respondents to modify their answers based on outside expectations, and we minimized the
length and repetitiveness of the questionnaire as much as possible (MacKenzie and
Podsakoff, 2012). In addition, following the approach of many previous studies (e.g. Vaccaro
et al., 2012; Dibrell et al., 2008; Bharadwaj and Menon, 2000), we carried out the Harman’s
one-factor test to check whether a single factor can be extracted and account for most of the
variance in the variables included in our study, which would confirm the presence of
common method bias (Podsakoff and Organ, 1986; Harman, 1967). To this purpose, we
conducted a principal component analysis of all the items employed in the study forcing the
number of factors to one and the explained variance is 33.4 percent, thus showing that
common method bias is not a thread in our database.

Mean SD

I4.0 2.26 0.81

INV_MAN 2.26 0.94
INV_DES 2.56 1.06
INT_SC 3.34 0.92
EXT_SC 2.83 0.95
Table II. AC 3.22 0.88
Descriptive statistics MNG_SUPP 3.34 1.09

I4.0_
Y/N I4.0 INV_MAN INV_DES INT_SC EXT_SC AC MNG_SUPP R&D Firm size VIF

I4.0_Y/N 1.000
I4.0 0.924 1.000
INV_MAN 0.340 0.385 1.000 2.43
INV_DES 0.338 0.404 0.711 1.000 2.22
INT_SC 0.426 0.470 0.244 0.325 1.000 2.51
EXT_SC 0.347 0.379 0.511 0.477 0.432 1.000 1.92
AC 0.445 0.473 0.264 0.302 0.767 0.576 1.000 3.03
MNG_SUPP 0.335 0.373 0.400 0.304 0.393 0.493 0.475 1.000 1.52
Table III. R&D 0.265 0.266 0.066 0.144 0.167 0.163 0.234 0.151 1.000 1.14
Correlations Firm size 0.067 0.138 0.268 0.286 −0.007 0.177 0.018 −0.054 0.213 1.000 1.21
4. Data analysis and results Industry 4.0
The results of the first part of the analyses are presented in Table IV. Results of the logistic technologies
regression, investigating the impact of investments and SC on the probability to adopt I4.0 in SMEs
technologies, show that both internal and external SC enhance the likelihood that SMEs adopt
I4.0 technologies, whereas investments in AMTs do not have a significant impact. Results of
the OLS regression, investigating the impact of investments and SC on the intensity
of adoption of I4.0 technologies, indicate that only one of the two components of the amount of 635
investments in AMTs is significantly associated to the level of adoption of I4.0 technologies,
i.e. the one associated to investments in manufacturing. Instead, investments in design are not
statistically significant. As far as SC is concerned, higher levels of internal SC are likely to lead
to higher levels of I4.0 adoption, whereas external SC does not seem to have a significant
impact. Therefore, H1, H2a and H2b are only partially supported.
Regarding moderation, on the one hand, results of the logistic regression exhibited in
Table V demonstrate that management support positively moderates the impact internal
and external SC have on the probability to adopt I4.0 technologies. Indeed, internal and
external SC have a positive influence on the probability to adopt I4.0 technologies only in the
“high” group, i.e. those SMEs that register high levels of management support. Instead,
investments in manufacturing and design remain not significant either in the “high” or
“low” group. On the other hand, the OLS regression indicates a significant impact of

Logistic regression (dep. var. I4.0_Y/N) OLS regression (dep. var. I4.0)
Odds ratio p-value Estimates p-value

INV_DES 1.432 0.331 0.056 0.459

INV_MAN 1.156 0.746 0.181 0.040**
INT_SC 1.696 0.050** 0.298 0.000***
EXT_SC 2.159 0.016** 0.034 0.630
Firm size 0.876 0.762 0.023 0.799
R&D expenses 2.046 0.019** 0.155 0.011**
(pseudo) R2 (0.28) 0.32
Adj. R2 – 0.29 Table IV.
No. of observations 163 163 Results of the
Notes: **,***Significant at 5 and 1 percent level, respectively regression analysis

Logistic regression OLS regression

(dep. var. I4.0_Y/N) (dep. var. I4.0)
High Low Chow test High Low Chow test

INV_DES 0.971 (0.163) 0.008 (0.987) p ¼ 0.076* −0.021 (0.852) 0.102 (0.352) p ¼ 0.135
INV_MAN 0.626 (0.479) 0.045 (0.942) p ¼ 0.089* 0.227* (0.090) 0.214 (0.135) p ¼ 0.058*
INT_SC 1.039** (0.017) −0.108 (0.817) p ¼ 0.008*** 0.362*** (0.003) 0.209** (0.050) p ¼ 0.035**
EXT_SC 1.131** (0.043) 0.225 (629) p ¼ 0.007*** 0.236** (0.028) −0.071 (543) p ¼ 0.009***
Firm size −0.545 (0.396) 0.277 (0.681) −0.026 (0.132) 0.076 (0.140)
R&D
expenses 1.018** (0.038) 0.582 (0.235) 0.186** (0.088) 0.105 (0.085)
(pseudo) R2 (0.41) (0.12) 0.24 0.19
Table V.
Adj. R 2
– – 0.20 0.14 Results of the
No. of regression analysis
observations 79 68 79 68 with moderators –
Notes: *,**,***Significant at 10, 5 and 1 percent level, respectively management support
MD investments in manufacturing, internal SC and external SC only in the “high” group, thus
58,4 making management support a moderator of such relationships. Instead, the impact
investments in design have on the I4.0 adoption that remains not significant independently
from the intervention of the moderator. The results of the Chow test further support all these
evidences. Therefore, H3 is partially supported, whereas H4a and H4b are supported.
As far as AC is concerned, as Table VI shows, it plays the role of moderator both in the
636 logistic and OLS regression, thus meaning that the impact that internal SC and external SC
have on the likelihood to adopt I4.0 and the intensity of adoption of I4.0 technologies is
significant only in the “high” group. Again, the Chow test further confirms these results.
Hence, H5a and H5b are supported. In particular, the relationship between external SC and
the intensity of I4.0 adoption becomes significant only in the presence of the moderator.
Concerning control variables, we tested the models with and without the control
variables. Firm size is not statistically significant in any model, whereas R&D expenses are
significant in all the analyses, but without influencing the impact that the independent
variables have on the dependent ones. This supports the view that financial investments
play a relevant role in the ability of the firm to adopt I4.0 technologies.

5. Discussion and conclusions

5.1 Discussion of results
The purposes of this paper were, first, to investigate whether investments SMEs made for
developing AMTs and SC are positively associated to their ability to adopt I4.0 technologies,
and, second, to understand whether the organizational context plays a moderation role in
these relationships. The rationale behind this study lays in the fact that while, on the one
side, SMEs are pushed toward making investments in AMTs and adapt their organizational
context to adopt I4.0 successfully, on the other side, there is no empirical evidence
supporting the effectiveness of these factors in I4.0 adoption. Moreover, the role of the
organizational context in the path toward I4.0 is still disregarded, as some recent studies on
the topic explicitly point out (e.g. Sena et al., 2019).
Results show that SMEs having stronger internal and external SC have a higher
propensity to adopt I4.0 technologies, and both management support and AC reinforce these
relationships, whereas investments in AMTs within the manufacturing area and internal SC
have a positive association with the intensity of I4.0 adoption. However, in presence of a
high level of management support and AC, the relationship between external SC and I4.0
adoption becomes positive and significant. Management support also moderates the impact
that investments in AMTs in the manufacturing area and internal SC have on the intensity
of adoption of I4.0 technologies. Contrarily, AMTs investments in the design area seem to

Logistic regression Linear regression

(dep. var. I4.0_Y/N) (dep. var. I4.0)
High Low Chow test High Low Chow test

INT_SC 0.843** (0.015) −0.703 (0.357) p ¼ 0.005*** 0.362*** (0.003) 0.157** (0.036) p ¼ 0.022**
EXT_SC 1.554** (0.027) 0.225 (629) p ¼ 0.017** 0.236** (0.028) 0.108 (0.241) p ¼ 0.016**
Firm size 0.334 (0.549) −1.161 (0.181) −0.108 (0.121) 0.172 (0.110)
R&D expenses 0.736** (0.044) 1.017 (0.175) 0.209** (0.086) 0.068 (0.090)
(pseudo) R2 (0.24) (0.19) 0.24 0.20
Table VI.
Results of the Adj. R2 – – 0.20 0.17
regression analysis No. of
with moderators – observations 79 68 79 84
absorptive capacity Notes: **,***Significant at 5 and 1 percent level
have no significant impact either on the propensity to adopt I4.0 technologies or the Industry 4.0
intensity of I4.0 adoption, with or without the effect of the moderator. technologies
Overall, our findings highlight that SC, both internal and external, seems to be the in SMEs
element that could activate the adoption of I4.0 technologies, but then investments in AMTs
within the manufacturing area and sustenance of internal SC are required to enhance the
intensity of adoption.
This is in line with recent contributions (Brettel et al., 2014; Dalenogare et al., 2018; 637
Akhtar et al., 2019) stressing the need of a new organization of work to support the changes
I4.0 technologies imply, first of all related to collaboration being an imperative in the context
of SMEs (Moeuf et al., 2018): for example a recent work of Akhtar et al. (2019) has
demonstrated how the use of cross functional teams’ skills positively affects big data driven
actions. Here SC has a twofold perspective: internal, maintaining the view that the capacity
of working in teams and leveraging the social context they live in may contribute to cope
with the fourth industrial revolution successfully (Sousa and Rocha, 2019; Erol et al., 2016),
and external, sustaining previous results that working with a variety of external actors may
help in finding appropriate solutions for particular problems posed by I4.0 (Erol et al., 2016;
Davies, 2015). To this regard, what we add to previous results is the difference between how
SC can trigger the path toward I4.0 and how it can nurture its development over time.
Indeed, results of this study show that a strong external SC increases the likelihood that an
SME adopts I4.0 technologies, maybe related to their positive inclination toward integration
outside the boundaries of the firm, which is the main principle of the fourth industrial
revolution. Instead, for external SC to impact on the intensity of adoption of I4.0
technologies, a high level of management support and AC are necessary. As regards the
moderating role of AC, SMEs may not possess all required knowledge to implement I4.0,
which calls for external expertise. However, there is the need to have someone within the
firm who is able to search for the knowledge the firms misses, understand and internalize
this external knowledge and exploit it successfully to make a purposively good use of it.
At the same time, also having the support and encouragement of managers is likely to push
employees to exploit external knowledge to adopt I4.0 technologies, supporting the
evidences of some previous studies (e.g. Gunasekaran et al., 2017; Lin et al., 2018) that, in the
context of big data, have highlighted the role of top managers in orchestrating resources
and building capabilities. Therefore, we predict that a strong external SC in terms of a
culture of openness and integration can trigger I4.0 implementation, whereas a strong
external SC in terms of the content of external knowledge can lead to an increased intensity
of implementation only if top management facilitates this process and people within the firm
have the ability to exploit this knowledge.
Overall, it is interesting to notice that, beyond technologies, integration seems to be at
the basis of I4.0. Beyond this reasoning on external SC, internal SC exhibits a strong
association with both the probability to adopt I4.0 technologies and the intensity of
adoption. This suggests that a revolution inside SMEs is taking place, in the sense that
those firms that have adopted I4.0 at higher levels have prepared an internal context able
to cooperate, share ideas and different backgrounds in an attempt to offer solutions to
complex problems and address multifaceted issues. SME managers confirm that the first
transformation within the I4.0 domain is the integration of internal systems and processes,
which is strongly supported by the possibility to put together different competences and
integrate different languages.
Our study confirms that top management has a fundamental role in supporting such a
changing scenario, because it is in charge of coordinating intra- and inter-firm
communication among different actors (Saberi et al., 2019; Kiel et al., 2017). Within this
context, investing in AMTs in the manufacturing area seems to be key to increase the
intensity of adoption of I4.0, according with Maghazei and Netland (2017), which is also in
MD line with Davies (2015) stating that the lack of financial resources could limit the success of
58,4 digitalization, overall for SMEs.
We can posit that these results concerning investments may be because the fourth
industrial revolution is still in its infancy, overall for SMEs that face more obstacles with
respect to large firms due to poorly formalized processes, less sophisticated IT
infrastructure and fewer economic capabilities (Dassisti et al., 2017). These results were
638 discussed also with some SME managers who have confirmed that SMEs have started
mainly from advances in the manufacturing processes with the purpose to make processes
more efficient and, consequently, reduce costs. SME managers agree upon the fact that there
is still some reluctance in integrating systems since the design phase with suppliers, because
they may not be ready for such technologies; therefore, this can be the rationale for the lack
of significance of the relationship between investments in AMTs with the design area and
the adoption of I4.0 technologies.
Actually, overall results confirm the standpoint that being willing to invest in AMTs is
fundamental to nurture the path toward I4.0. However, beyond that, an essential prerequisite
to the adoption of I4.0 technologies is the understanding and contribution of the organization
at all levels to avoid isolated applications in favor of an integrated approach creating the
organizational readiness for I4.0 (Müller et al., 2018), in terms of SC, management support
and AC.

5.2 Implications and future research

Based on the reasoning above, this paper significantly contributes to both theory and
practice. From a theoretical perspective, it provides support to the assumption that AMTs
are essential to increase the intensity of I4.0 adoption, thus suggesting the need to further
investigate the balance between investments and benefits or return on investments in the
I4.0 domain. Moreover, it enlarges the domain of I4.0 from the technological focus to a wider
scope that encompasses the whole organization, thus opening new paths for research in this
area. To this regard, I4.0 is far from being only a technological issue, because the object of
this transformation is the whole firm, following the vein of some recent research in this field
(e.g. Agostini and Filippini, 2019; Sena et al., 2019). Always related to the organizational
context, this study highlights the importance of integrating an internal with an external
perspective to investigate such phenomenon by looking within but also outside the firm
boundaries. Furthermore, it addresses the specific context of SMEs, laying the basis for a
deeper understanding of the dynamics behind the path toward I4.0 for SMEs, which is still
under-investigated. Studying the different dynamics between SMEs and large firms could
reveal interesting insights. Finally, it introduces the difference between the probability to
adopt I4.0 technologies and the intensity of adoption, which could tell us more as far as
antecedents of I4.0 are concerned.
From an empirical standpoint, this study offers SME managers some practical
recommendations concerning the relevance of investing in SC prior to start the path toward
I4.0 to lay solid bases to step from the third to the fourth industrial revolution. In particular,
SME managers, who often have a direct contact with employees, need to be aware that their
role could be vital to give a push and incentive toward I4.0 if they are able to motivate their
staff to face complex matters as those posed by I4.0. This could be done by providing them
with resources with a specific purpose and by disseminating knowledge and potential
advantages, thanks to I4.0. The key point might be represented by making employees feel
active part of the changing environment, thus avoiding the reluctance toward change based
on their fear to be replaced by technologies. Along the same line, the capabilities of
employees to share ideas and solve problems together, as well as to understand and absorb
I4.0-related knowledge from the outside are key elements managers should nurture within
their firms. As for the efforts governments are lavishing to sustain SMEs in their
digitalization path, the results of the study seem to support their relevance in terms of Industry 4.0
technological as well as managerial and organizational initiatives. However, beyond that, technologies
managers should also be aware that SMEs require investing in advanced technologies to go in SMEs
through the path toward I4.0 and fully exploit its potential, because external financial
support is not likely to sustain such a long path.
Obviously, this preliminary study calls for replication, also because the dynamics of the
I4.0 revolution are likely to be very fast and change rapidly, therefore also conditions 639
surrounding it could change as swiftly.
Future studies could investigate in depth how SMEs might exploit investments in the
design area to adopt I4.0 technologies. Along the same line, there could be other variables
supporting the path toward I4.0 in the SME context, as for example employees’
technological or soft skills. To this regard, according with the recent study of Dubey et al.
(2019) about the adoption of big data predictive analytics, integrating the perspective of the
resources with those offered by the institutional theory can reveal interesting insights.
More specifically, institutional pressures, represented by normative, mimetic and coercive
mechanisms, might positively affect the adoption of I4.0 technologies. Finally, endogeneity
deserves further investigation in future studies.

Note
1. For further information, please visit: www.interreg-central.eu/Content.Node/discover/programme.
html (accessed in February 2019).

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manufacturing competitive priorities”, International Journal of Technology Management, Vol. 67
Nos 2-4, pp. 245-268.

About the authors

Lara Agostini is Assistant Professor at the Department of Management and Engineering of the
University of Padua. Her main research areas are: networks, innovation management and IPRs. She
has published in International Journal of Management Review, Long Range Planning, Journal of Small
Business Management, Management Decision, Technology Analysis and Strategic Management,
Knowledge Management Research & Practice and European Journal of Innovation Management.
Lara Agostini is the corresponding author and can be contacted at: [email protected]
Anna Nosella is Full Professor of Business Strategy at the Department of Management and
Engineering of the University of Padua. Her main research interest focuses on innovation
management, dynamic capabilities and strategies. Her papers have been published in Technovation,
Long Range Planning, Management Decision, Journal of Business Research.

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