Please, refer to this article as: Agostini, L., & Filippini, R. (2019).

Organizational and managerial

challenges in the path towards Industry 4.0, European Journal of Innovation Management,
https://doi.org/10.1108/EJIM-02-2018-0030

ORGANIZATIONAL AND MANAGERIAL CHALLENGES IN THE PATH

TOWARDS INDUSTRY 4.0
Agostini, L. and Filippini, R.

ABSTRACT

Purpose – In the context of the fourth Industrial Revolution, this article aims to examine the

relationship between organizational and managerial practices and the adoption of I4.0

technologies in the manufacturing industry.

Design/methodology/approach – To reach this aim, we carried out a survey involving 257

Italian manufacturing firms. Then, we used a cluster analysis and a regression analysis to analyze

data.

Findings – Results show that three clusters of firms based on their level of adoption of I4.0

technologies (Adopters, Beginners, Non adopters) can be identified, which are also characterized

by significantly different levels of organizational and managerial practices. Moreover, the

regression analysis confirms that organizational and managerial practices at the firm process and

supply chain level have a direct impact on the implementation of I4.0 technologies, whereas

organizational and managerial practices at the human resource level seem to act as a moderator.

Originality/value – This article contributes to the debate surrounding I4.0 by stressing the

organizational and managerial challenges that firms willing to undertake an I4.0 transformation

have to face, which goes beyond the sole application of I4.0 technologies. Therefore, managers

should be aware that I4.0 is a challenge to be dealt with in the long run because it needs a

structured process based on a fertile ground at the organizational and managerial level.

1
Theoretically, this study opens the way to research on organizational and managerial practices as

antecedents of I4.0 and on the hierarchy among antecedents.

1. INTRODUCTION

The concept of Industry 4.0, identified as the fourth Industrial Revolution, was initially

introduced in Germany in 2011 (e.g. Lu, 2017; Sanders, 2016) referring to the integration of

physical objects, human actors, intelligent machines, production lines and processes across

organizational boundaries, meant to form a system in which all processes are integrated and share

information in real time frame (Hozdić, 2015). The basic principles of Industry 4.0 are therefore

the connection of machines, work pieces and systems, and businesses are creating intelligent

networks along the entire value chain that can control each other autonomously (Basl, 2017).

This suggests that this industrial revolution is likely to affect people, companies and entire supply

chains, thus the associated level of organizational complexity is high. For this reason,

manufacturing companies are looking for efficient means to accommodate the integration of I4.0

concepts into the existing setup (Sanders et al., 2017), considered that I4.0 technologies cannot

be bought on the shelf, rather they require the firm to be organized to apply them properly (Porter

and Heppelmann, 2015). Moreover, the way in which I4.0 technologies are integrated into

existing production systems and organizational contexts is still under investigation (Tortorella

and Fettermann, 2017). The literature on this topic is scant, despite it stresses that advances

related to manufacturing processes ought to be accompanied by advances also at the

organizational and managerial level to avoid significant but isolated gains in process efficiency

and product quality (Schumacher et al., 2016). Indeed, making Industry 4.0 applications smart

requires a holistic approach and sometimes a change in the business model (i.e. new value

2
proposition, new type of relationship with customers) (Porter, 2015), which further complicates

the development process (Preuveneers and Ilie-Zudor, 2017).

Within this domain, to contribute to bridge the specific gap concerning the lack of clarity on

the antecedents of I4.0 implementation in manufacturing companies (Müller et al., 2018), the

purpose of this article is to examine the relationship between organizational and managerial

practices and the adoption of I4.0 technologies in the Italian manufacturing industry using two

methods: a cluster analysis and a regression analysis. The rationale behind the relevance of this

purpose is that given the high practical and theoretical relevance of I4.0 technologies,

understanding the underlying organizational and managerial dynamics of their implementation

becomes necessary (Müller et al., 2018).

Therefore, this article has a twofold relevance: from a theoretical standpoint, we propose a

more encompassing approach that takes into consideration those organizational and managerial

aspects that complement the adoption of digital technologies; from a practical standpoint, we

suggest entrepreneurs and managers those organizational and managerial practices that may

support the implementation of I4.0 technologies.

The reminder of the article is structured as follows: in the next paragraph, we present the

existing literature on the organizational and managerial practices in the context of I4.0, then we

explain the methodology we used to carry out our study, followed by data analysis and results

that are discussed in the final part of the article where we also present the implications of our

study.

2. THEORETICAL BACKGROUND AND HYPOTHESES

2.1 The concept of Industry 4.0

3
 Industry 4.0 is the widely accepted term used to refer to the Fourth Industrial Revolution,

despite a shared definition does not exist yet. Due to a proliferation of studies in recent years, not

only by academics but to a larger extent by consultants, a number of other words are used as

synonyms, as Cyber-Physical System (CPS), Smart Factory/Manufacturing, and Internet of

Things (Liao et al., 2017), with a bit of confusion among them. To clarify things, we can start by

defining CPS as transformative technologies for managing interconnected systems between its

physical assets and computational capabilities (Lee et al., 2015). The integration of CPS with

innovative production, logistics and services practices would lead to an I4.0 factory (Lee et al.,

2015). Indeed, I4.0 is often identified with a number of technologies involving all these aspects,

as internet of things, big data and analytics, cybersecurity, which belong to the CPS domain, to

which other production technologies are added, as advanced manufacturing systems, additive

manufacturing, 3D printing (e.g. Tortorella and Fettermann, 2017; Rüßmann et al., 2015;

Deloitte, 2015). In line with that, in 2016 the Italian Ministry of Economic Development has

delimited the scope of Industry 4.0 to nine technologies (i.e. Industrial Internet of Things, Cloud

computing, Cybersecurity, Big Data and Analytics, Simulation, Horizontal and Vertical

Integration, Added Manufacturing, Advanced Manufacturing Solutions, Augmented Reality) and

designed a national plan for Industry 4.0 to support firms in exploiting the potential of the

opportunities the fourth industrial revolution offer.

In the last years, different reports have been published that describe the different maturity

levels of firms with regard to Industry 4.0 and posit the organizational and managerial features

that companies registering a higher maturity level of Industry 4.0 are likely to have (e.g. Kane et

al., 2017; Perego et al., 2017). Despite these reports argue there are some patterns in the adoption

of I4.0 technologies, and stress the significance of organizational and managerial issues to

support such implementation, they do not prove it empirically. Therefore, this article aims to
4
bridge this first gap in the literature by exploring whether different groups of firms can be

identified based on their level of adoption of I4.0 technologies and whether they are also

characterized by different organizational and managerial practices.

2.2 Organizational and managerial issues in the I4.0 context

As anticipated, the literature focusing on the organizational and managerial facets of I4.0 is

still scant, which is due to the relative newness of the topic of I4.0, as well as to the absence of a

reference model for what concerns the organizational and managerial context supporting firms in

the path towards I4.0.

With the aim of contributing to bridge this gap, the purpose of this study is to analyse the I4.0

behaviour of manufacturing firms, classifying them according to their level of implementation of

I4.0 technologies, and unveiling whether organizational and managerial practices may affect

these implementation levels.

To reach this purpose, firstly, we reviewed the academic and practitioner literature within the

domain of I4.0, with a particular attention on those articles focusing on the organizational and

managerial practices.

According to the view that I4.0 is likely to affect people, production processes and entire

supply chains (Hofmann and Rüsch, 2017), extant literature address organizational and

managerial practices at three levels: the human resource level, the firm level, and the supply

chain level. The extant literature discusses these different organizational and managerial practices

in the domain of I4.0, but without testing empirically the association with the implementation of

I4.0 technologies and without taking such an overarching approach, which is the aim of this

study.

5
2.2.1 Organizing for I4.0 – Human resources

At a human resource level, Industry 4.0 propagates the idea of workers that increasingly will

focus on creative, innovative and communicative activities (Erol et al., 2016a). Indeed, all the

challenges that I4.0 poses require continuous innovation and learning, which is dependent on

people capabilities (Shamim et al., 2016). Therefore, the role of employees during Industrial

Revolutions is very important (Sirotek and Firlus, 2016) and Industry 4.0 requires a labour force

with high skill levels (Balasingham, 2016). This includes developing and establishing training

and workshops for the employees, with the focus on new core tasks such as how to manage and

control digitized systems. Therefore training and continue professional development of

employees are of major importance to succeed in early stages of the transition towards

digitalization (Kagermann, 2013).

Beyond skills, individuals are embedded in a social context, which requires the ability to

communicate, cooperate and to establish social connections and structures with other individuals

and groups. The full digital integration and automation of whole manufacturing processes in the

vertical and horizontal dimensions imply that workers will be responsible for a broader process

scope and will need the ability to understand relations between processes, the information flows,

and to cooperate ad-hoc in finding appropriate solutions for particular problems (Erol et al.,

2016a).

The possibility for employees to benefit from more responsibility and personal development

thanks to the implementation of Industry 4.0 needs to be stimulated by managers (Kagermann,

2013). Managers must be able to build or act as mediators that enable social processes and

decision processes (Erol et al., 2016a; Adolph et al., 2014). Therefore, managers’ support to

employees, which reduces distance between the workers and the managers of the plant through

the reduction of hierarchical levels, higher autonomy of teams and workers, wider distribution of
6
decision authority can facilitate organizational learning and innovations by increasing

employee participation (Bartezzaghi et al., 2017; Shamim et al., 2016; Schuh et al., 2014).

2.2.2 Organizing for I4.0 – Firm processes

Overall, the literature (e.g. Tamás et al., 2016) stresses that process improvement becomes

necessary in the context of Industry 4.0. In this domain, the literature has dedicated some

attention to lean production (LP). Von Haartman et al. (2016), based on a survey in

manufacturing companies from developed countries, indicate that LP may be a prerequisite for

digital technologies used in production. Overall, Kolberg et al. (2017) affirm that LP can be

considered as a complement to the technological point of view emphasised in I4.0. LP and I4.0

share common features, as decentralised and simple structures over large and complex systems

(Zuehlke 2010) to make an example, thus suggesting a possible interrelation between the two

phenomena. Furthermore, such a changing environment requires that companies must be able to

quickly adapt their production methods, being capable of continuously improving their

production processes and also of developing them further (Cachay and Abele, 2012). However,

contradictory evidences found in the literature (e.g. Erol et al., 2016a; Sanders et al., 2016;

Schumacher et al., 2016) indicate that the comprehension of such association still needs to be

deepened and better explored (Tortorella and Fettermann, 2017; Sanders et al., 2016).

Considered that the digital infrastructure and its connectivity with the Internet is one of the

core values under Industry 4.0 (Davies, 2015), the existing capabilities of manufacturing firms

related to the ICT infrastructure plays a key role within the process of digitalization

(Balasingham, 2016; Stock and Seliger, 2016). Actually, the existence of a modern ICT

infrastructure seems to be an essential prerequisite to the activities at the core of I4.0, as data

transmission or system integration (Erol et al., 2016b; Schumacher et al., 2016).

7
2.2.3 Organizing for I4.0 – Supply chain

At a supply chain level, integration and collaboration seem to be key in the implementation of

I4.0. Indeed, I4.0 has both vertical and horizontal integration at its core: integration of the various

IT systems used in the different stages of the manufacturing and business planning processes

within a company and between several different companies, integration of the various IT systems

at the different hierarchical levels, and integration throughout the engineering process so that the

digital and real worlds are integrated across a product’s entire value chain and across different

companies (Liao et al., 2017). Consequently, the flow of materials, information and knowledge

across the whole supply chain is likely to be a significant driver towards I4.0 that calls for

increasing openness and adaptability (Wang et al., 2015). Regarding the flow of material across

companies, just-in-time (JIT) primarily focuses on the supplier-buyer relationship and it seeks for

a demand-tailored realisation of goods exchange processes aiming to increase overall supply

chain flexibility and agility (Wang et al., 2015). Therefore, JIT may enable actors to exchange

and act upon real-time information in a coordinated end-to-end fashion (Hofmann and Rüsch,

2017). Regarding information and knowledge flows, Schuh et al. (2014) assert that the

availability of information along the value chain, as well as the soft component of cooperation

across all borders, technologies and activities facilitate the path towards I4.0. Wang et al. (2015)

confirm that the increasing connectivity and capabilities of computational systems drive the

creation of entirely new systems characterised by, among others, new cross-domain

collaboration. Indeed, open innovation is commonly included in maturity models to assess a firm

readiness to Industry 4.0 and it is considered an important element demonstrating a firm network

orientation that I4.0 requires (e.g. Schumacher et al., 2016; Prause, 2015).

8
 Based on these evidences from the literature, we formulated two sets of hypotheses: the first

one aims to verify the existence of different profiles of firms based on the adoption of I4.0

technologies and organizational and managerial practices, whereas the second one intends to test

the relationship between the implementation of I4.0 technologies and organizational and

managerial practices.

H1: Manufacturing firms can be grouped based on their level of implementation of I4.0

technologies, where firms within each group will share similar characteristics as far as the

organizational and managerial practices are concerned.

H2: Higher levels of organizational and managerial practices positively impact the

implementation of I4.0 technologies in manufacturing firms.

H2a: Higher levels of organizational and managerial practices at the human resource

level positively impact the implementation of I4.0 technologies in manufacturing firms.

H2b: Higher levels of organizational and managerial practices at the firm process level

positively impact the implementation of I4.0 technologies in manufacturing firms.

H2c: Higher levels of organizational and managerial practices at the supply chain level

positively impact the implementation of I4.0 technologies in manufacturing firms.

Figure 1 depicts the framework that provides theoretical support to this research.

Figure 1: Research framework

9
3. METHODOLOGY

Based on the purpose of our study, we decided to rely on primary data that are then analysed

by means of statistical quantitative techniques, namely a cluster analysis, complemented by a t-

test, and a regression analysis. Details of this procedure are explained in the following

paragraphs.

3.1 Sample

Considered that the study is supposed to provide a general overview on the level of

implementation of I4.0 technologies in Italian manufacturing firms and the associated managerial

and organizational challenges, 1000 Italian manufacturing firms were randomly selected,

independently of their size. We used the AIDA database that contains economic financial data of

Italian firms. Then, we sent an e-mail to the owner or the managing director of all the identified

firms inviting them to participate to an on-line survey on the theme of I4.0. After two recalls, 257

useful questionnaires were received, corresponding to a response rate of 25.7%. As far as firm

size is concerned, 32.1% are small, 33% are medium and 34.9% are large firms.

10
3.2 Measures

In this study, to measure the adoption level of I4.0 technologies, we identified nine inter-

related Industry 4.0 technologies, as suggested by the Italian Ministry of Economic Development

(2016). This approach follows the recent article by Tortorella and Fettermann (2017) who build

on the assumption that Industry 4.0 is based on enabling technologies. We asked whether firms

are adopting now or are formally planning to adopt in the near future each one of these

technologies at a process/supply chain and product level (binary variable assuming values 0 or 1).

Then, we summed the technologies that were already adopted at a process/supply chain and

product level, thus obtaining the I4.0 TECH_PROC and I4.0 TECH_PROD variables. The

maximum value that I4.0 TECH_PROC may assume is 18 (adoption of the nine technology at the

process and supply chain level) and I4.0 TECH_PROD 9.

Instead the following constructs and associated items were assessed on a Likert scale ranging

from 1 (completely disagree) to 5 (completely agree).

Regarding lean production, scientific journals have published a number of articles that focus

on describing and characterising the content of LP; yet, there is not a precise and agreed upon

way of defining or measuring LP (Tortorella and Fettermann, 2017). Therefore, we asked the

intensity of application of a series of lean methods taken from the literature, and the factor

analysis divided them into two different factors, as Table 2 shows. The former includes 5S,

written work procedures and the creation of standards and regular control of standard respect,

which refers to organizational methods (LEAN_ORG), whereas the latter comprises set-up time

reduction in production, kanban and pull systems in production, balancing production processes

and waste reduction, which refers to methods applied in production (LEAN_PROD). This is in

11
line with the tendency towards creating groups of lean production methods (e.g. Matt and Rauch,

2013).

The three-item scale to measure continuous improvement and learning (CONT_IMPR) is

taken from Liu et al. (2006) and it focuses on the extent to which organization members value

and engage in activities that facilitate continuous product and process improvement and learning.

Just-in-time delivery by suppliers (JIT_SUPP) measures whether vendors have been integrated

into production in terms of making frequent or JIT delivery and is taken from Matsui (2007).

Along the same line, just-in-time link with clients (JIT_CL) assesses whether the plant has

applied the JIT delivery concept and the pull system concept in the operational link with clients.

Both are measured using a three-item scale.

The four-item scale for information flow integration (SC_INT) is defined as the degree to

which a focal firm uses global optimisation with its supply chain partners to manage the extent of

operational, tactical and strategic information sharing that occurs between a focal firm and its

supply chain partners (Rai et al., 2006).

Employees’ skills for innovation (SKILLS) and is composed of three items indicating the

overall skill, expertise and knowledge levels of an organisation employees. Internal social capital

is measured through a three-item scale that reflects the value embedded in the interactions among

employees and concerns the quality of such relationships in terms of employees’ knowledge

exchange habits, propensity to collaborate and work in groups. Both these scales are taken from

Subramaniam and Youndt (2005).

The three-item scale for task-related training for employees (TRAIN) factor is reflected by a

firm’s effort to upgrade employee skills through continual and regular training activities

(Cantarello et al., 2013).

12
 The measurement scale used to measure the organizational support context (ORG_CNTX) has

a theoretical foundation in Gibson and Birkinshaw’s (2004) work and captures the extent to

which management systems in organisations encourage people to challenge outmoded practices

and devote considerable effort to developing subordinates, while pushing decisions down to the

lowest appropriate level (Cantarello et al., 2013).

Then, we examined also firms’ inclination towards open innovation (OI) and the ICT level

(ICT). As far as OI is concerned, we asked firms whether they have regular collaborations for

innovation with universities/research centres, suppliers, clients, other innovative firms and

consultants (Landry et al., 2002), thus obtaining a firm OI breadth by summing the number of

diverse actors a firm has a collaboration with, which ranges from 1 to 5.

As for ICT, we asked whether firms has an ERP and if so for which functions, as well as

whether they have implemented data exchange with suppliers and clients, and collection and

analysis of machine data. On such basis, we built an ICT index ranging from 1 (no ERP or ERP

only for a few functions) to 5 (ERP for all functions, data exchange and collection and analysis of

machine data).

To carry out the regression analyses, we aggregated these constructs into the macro-variables

human resources (HR), firm process (FIRM) and supply chain (SC) by calculating the mean

value, in line with the approach used by previous studies (e.g. Agostini and Nosella, 2017; Furlan

and Vinelli, 2018).

3.3 Statistical procedure

Our methodology consists of a confirmatory factor analysis, a cluster analysis, complemented

by a t-test, and a regression analysis to assess the relationship between organizational and

managerial practices and the level of adoption of I4.0 technologies. Principal component analysis
13
with promax was conducted to identify and confirm the different factors under each construct in

our conceptual model using the software SPSS. Almost all items were significantly related to

their underlying constructs, providing support for convergent validity and factor loadings ranged

from 0.65 to more than 0.9, with most of the items greater that 0.7 (see Table 1). To ensure

convergent validity, we eliminated items that load greater than 0.45 in more than one factor. We

further assessed discriminant validity by examining Cronbach’s α, which showed alphas

definitely higher than the acceptable threshold of 0.60 (Nunally, 1978).

After carrying out the confirmatory factor analysis, the cluster analysis was run with SPSS.

The technique of cluster analysis is useful to summarise the data and, in an explorative way, to

group the different categories of firms into “clusters” according to their similarities or

dissimilarities in terms of certain characteristics (Cantwell and Janne, 1999), here the adoption of

I4.0 technologies. In this specific case, the method applied to form the clusters is the K-means.

According to the aim of this paper, the variables employed in the cluster analysis to define groups

referred to the adoption of I4.0 technologies (I4.0 TECH_PROC, I4.0 TECH_PROD), computing

the average of the items score of each construct. After conducting the cluster analysis, a t-test was

carried out to verify if the identified clusters of firms showed significant difference in terms of

organizational and managerial practices using the software Stata.

Lastly, to corroborate these results, a negative binomial regression analysis, appropriate for

non-negative integer count dependent variables (Hausman et al., 1984), was performed to test the

impact of organizational and managerial practices at the human resource, firm process and supply

chain level on the level of implementation of I4.0 technologies both at the product and process

level. Additionally, firm size, measured by means of dummy variables for small, medium and

large firms, was introduced as a control variable.

14
 Table 1: Results of the factor analysis
Factor Cronbach's
Construct Id Items loading alpha

Please, indicate your level of agreement (1=strongly disagree; 5=strongly agree) with the following sentences
Skills for regarding your employees in your company in the last years:
innovation
SKILLS_1 Our employees are highly skilled to develop innovations 0.840
(Subramaniam
and Youndt, SKILLS_2 Our employees are highly skilled related to digital technologies 0.836 0.749
2005)
SKILLS_3 Our employees are widely considered the best in our industry 0.744
Please, indicate your level of agreement (1=strongly disagree; 5=strongly agree) with the following sentences
regarding training for employees in your company in the last years:
Training for Our plant employees receive training and development in
employees TRAIN_1 0.915
workplace skills, on a regular basis
(Cantarello et Management at this plant believes that continual training and
TRAIN_2 0.846 0.872
al., 2013) upgrading of employee skills is important
TRAIN_3 Our employees regularly receive training to improve their skills 0.859
Please, indicate your level of agreement (1=strongly disagree; 5=strongly agree) with the following sentences
Internal social regarding collaboration among employees in your company in the last years:
capital Our employees are skilled at collaborating with each other to
ISC_1 0.822
(Subramaniam diagnose and solve problems
and Youndt, ISC_2 Our employees share information and learn from one another 0.865 0.885
2005) Our employees interact and exchange ideas with people from
ISC_3 0.892
different areas of the company
Please, indicate your level of agreement (1=strongly disagree; 5=strongly agree) with the following sentences
regarding managers in your company in the last years:
Organizational
Managers in my organisation devote considerable effort to
support context ORG_CNTX_1 0.839
developing subordinates
(Birkinshaw
Managers in my organisation push decisions down to the lowest
and Gibson, ORG_CNTX_2 0.904 0.862
appropriate level
2004)
Managers in my organisation issue creative challenges to their
ORG_CNTX_3 0.891
people instead of narrowly defining tasks
Please, indicate your level of agreement (1=strongly disagree; 5=strongly agree) with the following sentences
regarding continuous improvement in your company in the last years:
Continuous If we aren’t constantly improving and learning, our performance
CONT_IMPR_1 0.742
improvement will suffer in the long term
(Flynn et al, We believe that improvement of a process is never complete;
CONT_IMPR_2 0.770 0.607
1999) there is always room for more incremental improvement
We strive to continually improve all aspects of products and
CONT_IMPR_3 0.670
processes, rather than taking a static approach
Please, indicate to what extent (1=not applied; 5=highly applied) these lean methods have been applied in your
company in the last years:
LEAN_1 5S 0.713
LEAN_2 Written work procedures 0.811 0.736
Lean methods
(Matt and LEAN_3 Creation of standards and regular control of standard respect 0.850
Rauch, 2013) LEAN_4 Set-up time reduction in production 0.786
LEAN_5 Kanban and pull systems in production 0.806
0.830
LEAN_6 Balancing production processes 0.872
LEAN_7 Waste reduction 0.831
Please, indicate your level of agreement (1=strongly disagree; 5=strongly agree) with the following sentences
JIT with regarding delivery by your suppliers to your company in the last years:
suppliers JIT_SUPP_1 Our suppliers deliver to us on a just-in-time basis 0.781
(Matsui, 2007) 0.722
JIT_SUPP_2 We receive daily shipments from most suppliers 0.650

15
 JIT_SUPP_3 Our suppliers are linked with us by a pull system 0.849
Please, indicate your level of agreement (1=strongly disagree; 5=strongly agree) with the following sentences
regarding delivery to your clients in the last years:
JIT_CL_1 Our clients receive just-in-time deliveries from us 0.785
JIT with clients
(Matsui, 2007) JIT_CL_2 We always deliver on time to our clients 0.825
0.701
We can adapt our production schedule to sudden production
JIT_CL_3 0.756
stoppages by our clients
Please, indicate your level of agreement (1=strongly disagree; 5=strongly agree) with the following sentences
regarding information sharing along the supply chain in the last years:
Production and delivery schedules are shared across the supply
Information SC_INT_2 0.897
chain
flow
Supply chain members collaborate in arriving at demand
integration SC_INT_3 0.844
forecasts
(Ray et al., 0.879
2006) Our downstream partners (e.g., distributors, wholesalers,
SC_INT_4 0.759
retailers) share their actual sales data with us
SC_INT_5 Inventory data are visible at all steps across the supply chain 0.901

4. RESULTS

4.1 Results of the cluster analysis

Regarding H1, the results of the cluster analysis show that three groups of firms can be

identified based on their level of adoption of I4.0 technologies: 12.4% of firms belong to Cluster

1 (the “high” group, called Adopters), 38.2% to Cluster 2 (the “medium” group”, called

Beginners), and 49.4% to Cluster 3 (the “low” group”, called Non adopters), presenting a

decreasing level of adoption of I4.0 technologies both at a process/supply chain and product

level.

Table 2 summarizes the mean value and standard deviation of the adoption of I4.0

technologies at a process/supply chain and product level used as clustering variables. Of course,

the ANOVA confirms level of adoption of I4.0 technologies both at the process/supply chain and

product level is significantly different between the three clusters. Moreover, we can notice that

the adoption of I4.0 technologies is higher at the process than at the product level.

16
 Table 2: Clustering variables – Descriptives and ANOVA

Cluster 1 Cluster 2 Cluster 3

(Adopters) (Beginners) (Non adopters)
Variable ANOVA
Standard Standard Standard
Mean Mean Mean
deviation deviation deviation
I4.0 TECH_PROC 10.52 1.88 5.61 1.37 0.92 1.31 ***
I4.0 TECH_PROD 5.31 1.69 3.01 1.48 0.39 0.71 ***
Note: *** means that the test is significant at p<1% level

The subsequent step, i.e. analysis of difference between groups in terms of organizational and

managerial practices, reveal interesting insights. Results highlight that the Adopters,

characterized by higher levels of adoption of I4.0 technologies, registers also significantly higher

levels of organizational practices than Beginners and Non adopters at all levels, as Table 3

exhibits. It is interesting to notice that differences in terms of organizational and managerial

practices between Beginners and Non adopters are not all statistically significant. More

specifically, the two clusters differ in terms of skills for innovation, use of lean methods, use of

ICT and collaboration with external entities.

Table 3: Organizational and managerial practices – Descriptives and t-test

Cluster 1 Cluster 2 Cluster 3

(Adopters) (Beginners) (Non adopters) T-test T-test T-test
Variable
Std. Std. Std. 1-2 2-3 1-3
Mean Mean Mean
dev. dev. dev.
SKILLS 3.51 0.87 2.97 0.79 2.48 0.87 *** ** ***
ISC 3.84 0.97 3.37 0.85 3.47 0.81 *** n.s. **
TRAIN 4.30 0.80 3.64 0.90 3.70 0.95 *** n.s. ***
ORG_CNTX 3.83 0.82 3.22 0.89 3.56 0.81 *** n.s. **
LEAN_ORG 4.09 0.70 3.51 0.87 3.27 0.94 *** ** ***
LEAN_PROD 3.91 0.86 3.09 0.92 2.76 0.88 *** ** ***
CONT_IMPR 4.78 0.30 4.46 0.59 4.40 0.76 *** n.s. ***
ICT 3.27 1.22 2.96 1.19 2.03 1.12 ** *** ***
JIT_SUPP 3.61 0.79 2.87 0.85 2.83 0.84 *** n.s. ***
JIT_CL 3.72 0.75 3.34 0.87 3.43 0.88 ** n.s. **

17
SC_INT 3.71 1.05 2.79 1.10 2.67 1.04 *** n.s. ***
OI 3.23 1.24 2.69 1.11 2.16 0.87 ** *** ***
Note: *** means that the test is significant at p<1% level; ** significant at p<5% level;
n.s. not significant

18
4.2 Results of the regression analysis

As far as H2 is concerned, we used a linear regression model to test the relationship between the

organizational and managerial practices at the human resource, firm process and supply chain

level and the level of implementation of I4.0 technologies.

As Table 4 exhibits, organizational and managerial practices at the firm process and supply chain

level seem to have a positive impact on the level of implementation of I4.0 technologies at the

product and process level, thus supporting H2b and H2c. Contrarily, organizational and

managerial practices at the human resource level seem not to affect the implementation of I4.0

technologies at the product or process level, which does not provide support for H2a.

Table 4: Results of the regression analysis

Dep. Var.: I4.0 TECH _PROD Dep. Var.: I4.0 TECH _PROC
Coefficient Coefficient Hypothesis testing
(p-value) (p-value)
0.385 -0.009
HR H2a not supported
(0.180) (0.982)
0.590* 1.740***
FIRM H2b supported
(0.075) (0.000)
0.647** 0.883**
SC H2c supported
(0.021) (0.025)
-0.750 -1.277*
Size_small
(0.715) (0.057)
-0.241 0.047
Size_medium
(0.522) (0.930)
Pseudo R2 0.09 0.10
Note: *** means that the test is significant at p<1% level; ** significant at p<5% level;
* significant at p<10% level

Taking the evidences emerging from the cluster analysis into consideration, this result was

surprising and suggested us that maybe organizational and managerial practices at the human

resource level could play a different role in the dynamics leading to the implementation of I4.0

technologies. On such grounds, we checked whether they could act as moderators, i.e. if they

19
strengthen the relationship between organizational and managerial practices at the firm process

and supply chain level and the level of implementation of I4.0 technologies. To this purpose, we

conducted a two-group analysis distinguishing the group of firms that register levels of

organizational and managerial practices higher than the mean of the sample (i.e. the HIGH group)

from the group of firms that have values of the moderating variable lower than the mean of the

sample (i.e. the LOW group).

Table 5 shows that the impact of organizational and managerial practices at the firm process and

supply chain levels are significant (vs not significant) or higher (vs lower) in the HIGH group

with respect to the LOW group, therefore organizational and managerial practices at the human

resource level act as a moderator. Moreover, the Chow tests, assessing the statistical difference

between the regression coefficients of the HIGH and LOW groups, result significant, which

provides further support to these results. Figure 2 depicts the final model.

Table 5: Results of the regression analysis – Moderation of organizational and managerial

practices at the human resource level

Dep. Var.: I4.0 TECH_PROD Dep. Var.: I4.0 TECH _PROC

Coefficient Coefficient Coefficient Coefficient
(p-value) (p-value) Chow test (p-value) (p-value) Chow test
HIGH group LOW group HIGH group LOW group
0.982* 0.480 2.245*** 1.224*
FIRM p = 0.032** p = 0.035**
(0.060) (0.250) (0.001) (0.059)
0.943** 0.398 0.952** 0.851
SC p = 0.017** p = 0.023**
(0.017) (0.291) (0.045) (0.145)
0.622 -0.726 -1.833** -0.335
Size_small p = 0.145 p = 0.056*
(0.360) (0.271) (0.043) (0.740)
-0.052 0.255 1.372 0.638
Size_medium p = 0.234 p = 0.396
(0.938) (0.592) (0.127) (0.384)
Pseudo R2 0.12 0.06 0.13 0.07
Note: *** means that the test is significant at p<1% level; ** significant at p<5% level;
* significant at p<10% level

20
 Figure 2: The final model

5. DISCUSSION AND CONCLUSIONS

The aim of this article was to analyse the I4.0 behaviour of manufacturing SMEs, classifying

them according to their level of implementation of I4.0 technologies, and unveiling whether

organizational and managerial practices may affect these implementation levels.

Data analyses, based on a survey involving Italian manufacturing firms, show the emergence

of three clusters with respect to the implementation of I4.0 technologies, the Adopters, the

Beginners and the Non adopters, that present also significantly different levels of organizational

and managerial practices. Moreover, the regression shows that organizational and managerial

practices at the firm process and supply chain level have a direct impact on the implementation of

I4.0 technologies, whereas organizational and managerial practices at the human resource level

seem to act as a moderator.

As far as the first evidence is concerned, we can notice there is a small group of firms that are

implementing I4.0 technologies more intensely and these firms are those that register also

significantly higher levels of all investigated organizational and managerial practices with respect

to all other sampled firms. Considered the time lag between organizational and managerial

practices and the implementation of I4.0 technologies, these results seem to point to the fact that

21
firms need to be shaped at all levels to reach high levels of implementation of I4.0 technologies.

Instead, there seem to be some organizational and managerial factors that pave the way to the

introduction of new I4.0 technologies, namely highly skilled employees regarding innovation and

digital technologies, the adoption of lean methods, the use of ICT tools and the ability to

collaborate with external entities for innovation.

To further corroborate our results, we carried out 15 in-depth interviews with managers of

sampled firms who explained they were not surprised. Indeed, they agreed upon the fact that

workers are the crucial link because the technology is not intelligent per se, rather it needs to be

set and implemented properly to work well. Therefore, expertise of workers, overall at lower

levels, is crucial at an initial stage. Moreover, they recognize that I4.0 technologies require a deep

knowledge of processes and lean philosophy soundly helps in achieving such knowledge and

allows not digitalizing waste. They also added that the presence of ERP for all functions and

systems to exchange data with suppliers and clients are required to install for example

Manufacturing Execution Sytems that are able to generate useful information from data collected

through intelligent sensors positioned in the production lines. This belongs to the Internet of

things domain and it represents where many firms frequently start from. Finally yet importantly,

the higher inclination towards open innovation highlight a higher propensity towards slackening

the boundaries of the firm, thus being ready to act as part of a network instead of a stand-alone

entity, which is at the basis of the I4.0 approach.

The second evidence provides further confirmation to the results of the exploratory factor

analysis, as well as to the theoretical idea prompted by Schumacher et al. (2016) that advances at

the organizational and managerial level are needed to get advances related to manufacturing

processes but avoiding significant but isolated gains at the production level. Managers we

discussed these results with also confirmed the I4.0 transformation needs to be prepared at the
22
organizational and managerial level before dealing with the technology. Indeed, I4.0 technologies

do not stand for I4.0 factory that is likely to require an overarching approach embracing different

perspectives and different practices within and outside firms. However, further research is

required to shed more light on these issues.

Therefore, this study opens the way to research on organizational and managerial practices as

antecedents of I4.0 and on the hierarchy among antecedents. On such basis, this article

contributes to the debate surrounding I4.0 by stressing the organizational and managerial

challenges that firms willing to undertake an I4.0 transformation have to face, which goes beyond

the sole application of I4.0 technologies. Moreover, the fact that three different clusters emerge

based on the level of implementation of I40 technologies and they are characterized by different

levels of organizational and managerial practices also suggests that I4.0 implementation is not an

on-off issue, but rather a pathway that could benefit from a longitudinal approach. Indeed, the

issue of time is not considered here, but it could reveal more precise insights regarding which

organizational and managerial practices are more effective at the different stages of the path

towards I4.0.

From a more practical standpoint, being I4.0 an all-encompassing paradigm that involves

many dimensions of the firm, i.e. technological, managerial, organizational and financial,

entrepreneurs and managers require an overarching perspective on the transformation their firms

need to undergo. Indeed, I4.0 requires not only focusing on the application of the I4.0

technologies, but also on the development of a series of organizational and managerial practices

that become key to face the fourth industrial revolution. More specifically, managers should

employ and take advantage of employees who are skilled in innovation and digital technologies,

adopt a lean philosophy, upgrade their ICT tools with particular reference to internal and external

integration, and open their firm boundaries to lay the basis for an I4.0 factory. Then other
23
organizational and managerial practices at the human resource, firm and supply chain level come

into play to boost the implementation of I4.0 technologies. Therefore, I4.0 is a challenge to be

dealt with in the long run because it needs a gradual and structured process based on a fertile

ground at the organizational and managerial level, which is likely to require further investigation.

We recognize this is a preliminary study and other variables may be taken into examination as

antecedents to the implementation of I4.0 technologies, as well as other countries and other

contexts. We are also aware that the implementation of I4.0 technologies could, in turn, generate

some changes at the organizational and managerial level, thus investigating the way around could

reveal useful insights.

24
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