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00-The Role of Digital Governance in The Integration of Performance Measurement Systems Uses and
00-The Role of Digital Governance in The Integration of Performance Measurement Systems Uses and
Manufacturing
To cite this article: Minna Saunila, Juhani Ukko, Mina Nasiri & Patrizia Garengo (13 Sep 2023):
The role of digital governance in the integration of performance measurement systems uses
and Industry 4.0 maturity, International Journal of Computer Integrated Manufacturing, DOI:
10.1080/0951192X.2023.2257918
CONTACT Minna Saunila minna.saunila@lut.fi Department of Industrial Engineering and Management, LUT University, Mukkulankatu 19, Lahti 15210,
Finland
© 2023 The Author(s). Published by Informa UK Limited, trading as Taylor & Francis Group.
This is an Open Access article distributed under the terms of the Creative Commons Attribution License (http://creativecommons.org/licenses/by/4.0/), which permits unrestricted use,
distribution, and reproduction in any medium, provided the original work is properly cited. The terms on which this article has been published allow the posting of the Accepted
Manuscript in a repository by the author(s) or with their consent.
2 M. SAUNILA ET AL.
In addition to PMS use, Industry 4.0 maturity may require entity operating in an environment that is constantly
a comprehensive assessment that enables firms to lead changing, thus necessitating the basic structure of any
and control the process. This type of digital governance control system: measure, compare, analyze, correct,
involves digital leadership and access to top managers and prevent’ (Bititci et al. 2018). Even though the devel
with full support and initiatives about using digital tech opment of PMS theory has paid attention to, for exam
nology as a new way of working, such as digital solu ple, understanding how to keep measurement systems
tions, digital networks, and digital platforms (El Sawy up to date (Melnyk et al. 2014), theorizing the unin
et al. 2016). tended consequences of PMSs (Franco‐Santos and
Few studies have investigated the connection Otley 2018), and using a decision theory perspective
between a PMS and Industry 4.0 (Frederico et al. 2020; on complexity in performance measurement
Kamble et al. 2020; Naeem and Garengo 2022; Xie et al. (Alexander, Kumar, and Walker 2018), Bourne et al.
2020). There is some research investigating how (2018) suggest that there remains a compelling need
Industry 4.0 transforms PMSs, but there is a lack of for further theoretical development regarding PMSs.
studies incorporating different uses of PMSs in this con A common feature of prior PMS work is the recognition
text. The majority of the previous studies are literature of two different types of organizational control – tech
reviews or case study approaches, which means there is nical control and social control (Franco‐Santos and
a need for large empirical studies on the effect of differ Otley 2018; Okwir et al. 2018; Smith and Bititci 2017) –
ent types of PMS use on Industry 4.0. Using empirical that need to be studied together in the context of the
evidence is based on SMEs in Finland, the present study complexity of the environment in which they operate
contributes to this research gap by studying the effect of (Franco‐Santos and Otley 2018). In addition, Ferreira
digital governance on Industry 4.0 maturity, along with and Otley (2009) have highlighted the need to alter
its mediating role on the relationship between the use PMSs according to the dynamics of an organization
of PMSs and Industry 4.0 maturity. and its environment. Complexity has a significant
Thus, the study’s novelty to manufacturing research impact on both PMSs (Melnyk et al. 2014; Okwir et al.
streams, especially to Industry 4.0 and smart manufac 2018) and the mechanisms at play in an organization
turing, is emphasized when commonly known that when PMSs are used (Bourne, Melnyk, and Bititci 2018).
PMSs are the most important management tools of It has been reported that organizational control theory
companies and that the existence of emerging tech could provide the basis for this investigation (Bititci
nologies at the core of Industry 4.0 increases the com et al. 2018; Bourne, Melnyk, and Bititci 2018;
plexity of this phenomenon, highlighting the need for Nudurupati, Garengo, and Bititci 2021). Next, an intro
a specific approach and method to adopting Industry duction of PMS and its types of use is presented.
4.0. The study also contributes to the literature on
performance measurement systems, especially in
2.2. PMS and its type of use
a manufacturing environment.
The rest of the paper proceeds as follows: section A PMS is a group of metrics that help quantify the
two covers the conceptual framework of the study and efficiency and effectiveness of actions (Neely 2005).
hypotheses development. The third section presents A PMS is critical for companies because it enables
the research methodology used. The results are pre managers to have access to a lot of information,
sented in the fourth section. The fifth section discusses which can help them operate successfully in a time
the results in light of the literature. Finally, in the sixth of transformation (Koufteros, Verghese, and
section, conclusions with future research possibilities Lucianetti 2014). PMSs can be used for different pur
and limitations are discussed. poses, and it has been confirmed that the type of use
can modify the outcome of PMS, which has led to an
increase in the interest in PMS use (Franco‐Santos,
2. Theoretical background Lucianetti, and Bourne 2012; Guenther and Heinicke
2019). Simons (1994) initially employed both diagnos
2.1. Organizational control theory and PMS
tic and interactive in control systems. After that
The current study builds on organizational control the Tessier and Otley (2012) have revised this view,
ory, which considers ‘the organization as a dynamic using diagnostic and interactive systems not as
INTERNATIONAL JOURNAL OF COMPUTER INTEGRATED MANUFACTURING 3
control systems but as a PMS to know how control 2021). Thus, there is a need for research to enhance
systems are used. our understanding about the connection between
The diagnostic use of PMSs can be explained as PMSs and digital transformation, which is referred to
a group of formal processes that use information to in the present study as Industry 4.0 maturity, along
sustain, modify, or optimize patterns in an organiza with examining whether changes to PMS use can be
tion’s activity (Henri 2006a; Koufteros, Verghese, and made in a proactive manner; the present study
Lucianetti 2014). These processes include monitoring explores the facilitating role of digital governance.
systems, reporting tools, and performance outcomes, Next, the literature is reviewed to identify current
which are shared with all staff members at companies. knowledge on PMSs and digital transformation, espe
According to Henri (2006a), the diagnostic use of cially as it is related to Industry 4.0 maturity and digital
PMSs considers tight controls of the strategies and governance; the literature review serves as the basis to
operations, as well as restricted information flow. The develop hypotheses.
purpose of the diagnostic use of PMSs is manifold,
including monitoring, focusing attention, and legiti
2.3. Industry 4.0
mization (Koufteros, Verghese, and Lucianetti 2014).
The monitoring purpose of diagnostic use helps man The concept of Industry 4.0 originated in Germany in
agers track the progress of the company toward goals 2011, having the aim of supporting production devel
and monitor the results (Henri 2006b). The focusing opment within cutting-edge technologies
attention purpose of diagnostic use enables man (Kagermann et al. 2013). Since then, this concept has
agers and organizations to focus on relevant issues been presented and developed in different countries
or set constraints on staff members’ behavior to reach with different terms, such as ‘smart manufacturing’,
goals (Simons, Dávila, and Kaplan 2000; Widener ‘Made in China 2025’, and ‘Future of manufacturing’
2007), as well as direct staff members on challenges (Kusiak 2018; Liao et al. 2017). All these terminologies
in making strategic decisions (Koufteros, Verghese, have a consensus that Industry 4.0 is the fourth indus
and Lucianetti 2014). The legitimization purpose of trial revolution caused by emerging technologies
diagnostic use assists in justifying decisions and sup (Frank, Dalenogare, and Ayala 2019; Masood and
porting actions in a way that compares the achieved Sonntag 2020) and by changes in the way of working
goals with the targeted ones (Henri 2006b). (Frank, Dalenogare, and Ayala 2019; Sahi, Gupta, and
The interactive use of PMS can be defined as Cheng 2020; Tortorella et al. 2020). Industry 4.0 has
a progressive activity demonstrated by communication changed the interactions among suppliers, stake
and active participation of top management, visualiz holders, and supply chains both internally and exter
ing new ways to manage organizational resources for nally, developing interaction in supply chains through
competitive advantages (Koufteros, Verghese, and digital platforms and connectivity (Dalenogare et al.
Lucianetti 2014). The interactive use of PMS enables 2018; Frank, Dalenogare, and Ayala 2019).
more searching and learning throughout the organiza Furthermore, Industry 4.0 involves smart working,
tion (Simons 1994). Furthermore, the interactive use of where smart approaches have been used to get busi
the PMS can lead to dialogue, hence generating new ness done in value chains (Frank, Dalenogare, and
ideas and initiatives (Widener 2007). According to Henri Ayala 2019). Smart approaches include using emer
(2006a), the interactive use of PMS provides an oppor ging technologies to connect with different parties
tunity for collecting and sharing information while and innovative business models for different types of
motivating debate among staff members. The interac interactions in the value chain (Dalenogare et al. 2018;
tive use of PMS is associated with strategy manage Masood and Sonntag 2020). Thus, connectivity
ment and learning (Franco‐Santos et al. 2007), more among different parties plays an important role in
communication and interaction (Guenther and Industry 4.0 (Müller, Buliga, and Voigt 2018).
Heinicke 2019), and priority settings (Spekle and Industry 4.0 can be considered in customer con
Verbeeten 2014). nectivity in the way that it tracks and monitors custo
It is clear that a PMS is a complex phenomenon, and mer behaviors and requirements (Porter and
how current business trends are impacting PMSs is not Heppelmann 2014; Tao et al. 2018). Furthermore,
yet understood (Nudurupati, Garengo, and Bititci Industry 4.0 provides a superior user experience for
4 M. SAUNILA ET AL.
customers through advanced technologies like virtual Furthermore, they also mentioned a lack of a clear
reality and digital twins (Tao et al. 2018). Additionally, method for evaluating Industry 4.0 technologies
Industry 4.0 can be involved in the new ways of against the requirements of SMEs (Culot et al. 2020;
operating and collaborating in supply chains with Elibal and Özceylan 2022; Trotta and Garengo 2019).
different parties (Dalenogare et al. 2018; Nasiri et al. Based on the previously presented literature, the
2020). Through digital platforms, Industry 4.0 con implementation of Industry 4.0 necessities
nects employees with each other and facilitates train a comprehensive approach meaning not only techno
ing, remote working, and operating with customers logical aspects but also considering strategies, work
(Tortorella et al. 2020). Thus, Industry 4.0 encom force competencies, cultural change, and the
passes both technology-related and people-related development of awareness and readiness to imple
aspects (Sahi, Gupta, and Cheng 2020; Tortorella ment the transformation (Rafael et al. 2020; Santos
et al. 2020), and the contribution of Industry 4.0 can and Martinho 2020; Wagire et al. 2021). Numerous
be seen in different domains and industries (Tortorella maturity models have been presented to support com
et al. 2020). It is worth mentioning that the existence panies in this transformation (e.g. Angreani, Vijaya, and
of emerging technologies at the core of Industry 4.0 Wicaksono 2020; Schumacher, Erol, and Sihn 2016;
enhances the complexity of this phenomenon, high Akdil et al. 2018). According to the Oxford English
lighting the need for a specific approach and method Dictionary, the concept of maturity refers to ‘state of
to adopt Industry 4.0 (Frank, Dalenogare, and Ayala being complete, perfect, or ready’ (Simpson and
2019; Masood and Sonntag 2020; Tortorella et al. Weiner 1989). Thus, Industry 4.0 maturity refers the
2020). extent to which an implementing entity is capable to
As one of the most recent trends and competitive implement Industry 4.0. Thus, the Industry 4.0 maturity
advantages for companies, Industry 4.0 needs models support the need for a comprehensive
a specific approach to adopt (Frank, Dalenogare, and approach by allowing to identify of a target value for
Ayala 2019; Masood and Sonntag 2020; Tortorella different dimensions covered by the model, and to
et al. 2020). Frank et al. (2019) concentrated on define the strategy to proceed from the current situa
Industry 4.0 technologies in manufacturing compa tion to the desired one (Rafael et al. 2020; Schumacher,
nies and proposed two main layers in the Industry Erol, and Sihn 2016; Akdil et al. 2018).
4.0 pattern: front-end technologies and based tech
nologies. Front-end technologies are the main con
2.4. Digital governance
cern within operational and market requirements,
including smart manufacturing, smart product, smart Governance is defined as the available rights of the
supply chain, and smart working, while base technol staff members, as well as the practices and decision-
ogies (e.g. IoT, big data, cloud services, analytics) making processes that employ resources to achieve
enable connectivity and smartness for front-end tech companies’ goals (O’Mahony and Bechky 2008).
nologies. These two layers can complete each other; Governance aims to assess an issue, possible knowl
however, companies still need to enhance their ability edge and skill sets, technologies, and networks to
in big data analysis. As mentioned by Tortorella et al. address the issue before then setting the governance
(2020), companies with organizational learning cap framework that will enhance the potential for success
abilities can adopt Industry 4.0 quicker because ful solutions (Nickerson and Zenger 2004). Because
Industry 4.0 is built on advanced interconnected tech currently handling digital transformation is complex
nologies and an integrated environment while also and has conflicting results (Sousa-Zomer, Neely, and
having knowledge sharing. Thus, companies that Martinez 2020; Vial 2019) and the critical element in
want to adopt Industry 4.0 need to update the com governance is handling possible conflict (O’Mahony
munication and process of information exchange in and Bechky 2008), to achieve positive outcomes in
a way that is compatible with emerging technologies. digital transformation, digitality will need to be gov
According to Masood and Sonntag (2020), a lack of erned using new criteria (Sama, Stefanidis, and
financial resources, shortage of knowledge, and lim Casselman 2021).
ited technology consciousness have been listed as the Digital governance is a comprehensive assessment
main challenges for SMEs in Industry 4.0 maturity. that enables firms to lead and control digital processes.
INTERNATIONAL JOURNAL OF COMPUTER INTEGRATED MANUFACTURING 5
Especially the digitalization of manufacturing has chains and consider a PMS as a crucial managerial
opened several opportunities to monitor, control, opti viewpoint. Because the monitoring purpose of diag
mize and manage different types of knowledge inten nostic use helps managers track the progress of the
sive processes to enhance real-time decision-making company toward goals and monitor the results (Henri
supports and problem solving (Cheng and Bateman 2006b), it is likely to drive the maturity of Industry 4.0,
2008; Katchasuwanmanee, Bateman, and Cheng which includes expectations for efficiency, integra
2016). Handling digital processes through digital gov tion, transparency, and customer’s satisfaction,
ernance involves digital leadership and the access to among others (Frederico et al. 2020).
top managers with the full support and initiatives Regarding the interactive use of a PMS, Klovienė
about using digitalization and digital technology as and Uosytė (2019) state that a PMS can provide
a new way of working, such as digital solutions, digital a rapid reactive ability, which is crucial in the maturity
networks, and digital platforms (El Sawy et al. 2016). of Industry 4.0; transformations in technology, busi
Additionally, the governance of digitalization is not ness environment, and organizational processes force
possible without employees’ support and eagerness developing a PMS to fit the context of Industry 4.0.
to learn digital skills and resources (Chen 2017; Sia, Because the interactive use of a PMS enables more
Soh, and Weill 2016). searching and learning throughout the organization
(Simons 1994), as well as dialogue and generating
new ideas and initiatives (Widener 2007), it is likely
3. Hypotheses development and research to drive Industry 4.0 maturity. Based on the above
model evidence, we believe that both the diagnostic and
interactive use of a PMS contributes to Industry 4.0
3.1. Hypothesis development
maturity. Thus, the following hypotheses are set:
3.1.1. Type of PMS use and industry 4.0 maturity
Previous studies have shown that PMSs are beneficial
in the Industry 4.0 context (Duman and Akdemir 2021; H1. The type of PMS use is positively associated with
Frederico et al. 2020; Xie et al. 2020). Horváth and Industry 4.0 maturity
Szabó (2019) suggest that increased managerial
emphasis on PMSs drives the maturity of Industry H1a. Diagnostic use of a PMS is positively associated
4.0. In their study, the PMS covers increased control with Industry 4.0 maturity.
and permitting real-time performance measurement.
Samaranayake et al. (2017) show a process-related H1b. Interactive use of a PMS is positively associated
PMS, covering, for example, flexibility in production with Industry 4.0 maturity.
and stability of the process, hence fostering techno
logical readiness to the maturity of Industry 4.0.
Because the diagnostic use of a PMS can be explained 3.1.2. Mediating role of digital governance
as a group of formal processes that use information to Industry 4.0 is at the heart of when companies seek to
sustain, modify, or optimize patterns in an organiza gain a competitive advantage. Industry 4.0 covers
tional activity (Henri 2006a; Koufteros, Verghese, and new ways of operating and collaborating among sup
Lucianetti 2014), this type of a PMS can foster Industry pliers, customers, supply chains, and other stake
4.0 maturity by improving process flexibility and sta holders both externally and internally (Dalenogare
bility (c.f. Samaranayake, Ramanathan, and et al. 2018; Frank, Dalenogare, and Ayala 2019; Nasiri
Laosirihongthong 2017). Similarly, the study of et al. 2020; Tortorella et al. 2020). Because the changes
Kamble et al. (2020) supports the diagnostic use of are remarkable, companies need to be ready to
a PMS in Industry 4.0 maturity; they examine smart develop both technology-related and people-related
manufacturing systems, finding that manufacturing abilities to successfully adopt Industry 4.0
goals and performance targets may guide the matur (Büyüközkan and Göçer 2018; Sahi, Gupta, and
ity of Industry 4.0. These targets require careful mon Cheng 2020; Tortorella et al. 2020). As discussed ear
itoring and related improvement. Frederico et al. lier, PMSs can play a beneficial role in Industry 4.0
(2020) study the maturity of Industry 4.0 in supply maturity (Frederico et al. 2020; Kamble et al. 2020).
6 M. SAUNILA ET AL.
For example, Nudurupati et al. (2016) studied the H2a. Digital governance mediates the relationship
resilient features of contemporary PMSs in digital between the diagnostic use of a PMS and Industry
economies, highlighting the benefits of new techno 4.0 maturity.
logical advancements and the integration of their
maturity through strategy. They also highlighted the H2b. Digital governance mediates the relationship
ability to use technologies such as big data and IoT to between the interactive use of a PMS and Industry
enhance decision making, as well as unlocking inno 4.0 maturity.
vation through collaboration and cocreations to cre
ate a competitive advantage. The ability and skills of
both the managers and knowledge workforce have
also been highlighted in many studies that have con 3.2. Research model
sidered the use of PMSs in digital transformation Based on the literature discussed above, the research
(Nasiri et al. 2020; Nudurupati, Tebboune, and model is shown in Figure 1. The first hypothesis covers
Hardman 2016). Managers who are operationally the direct effects, whereas the second hypothesis
responsible for digital strategy should have sufficient includes the mediating effects. These two major hypoth
strategic capabilities and experience from transforma eses are proposed to check if the type of PMS use can
tional and technological projects (Matt, Hess, and provide Industry 4.0 maturity or whether there is a need
Benlian 2015). for a booster-like digital governance to mediate the
The features presented above are also the key ele relationship between the type of PMS use and Industry
ments of digital governance, which is a comprehensive 4.0 maturity. Each major hypothesis encompasses two
assessment that involves digital leadership with the full subhypotheses, which are shown in Figure 1. Regarding
support and initiatives about using digitalization and the first hypothesis, the effects of different types of PMS
digital technology as a new way of working in digital use (including diagnostic use and interactive use) on
solutions, digital networks, and digital platforms (e.g. El Industry 4.0 maturity will be checked. The second
Sawy et al. 2016). As presented above, the use of PMSs hypothesis examines the mediating effect of digital
can be beneficial in the maturity of Industry 4.0, and governance between different types of PMS use (includ
the elements of digital governance can facilitate this ing diagnostic use and interactive use) and Industry 4.0
maturity. Based on the above evidence, we believe that maturity.
digital governance can facilitate the relationship
between both the diagnostic and interactive use of
a PMS and Industry 4.0 maturity. Thus, the following 4. Research method
hypotheses are set:
4.1. Sample and data collection process
Diagnostic use
of a PMS H1a
H2a
Digital Industry 4.0
governance maturity
H2b
selected, representing more than 30% of the entire 4.2. Measurement of construct
population. After removing invalid samples—986—
The construct of the measures was built through
the survey questionnaire was sent to the CEO of the
a combination of literature review in strategic man
5,830 SMEs in Finland. After four reminders and data
agement, Industry 4.0, and PMS research. All the mea
screening of invalid responses, 280 valid responses
sures were assessed on scales ranging from 1 to 7,
were achieved. Around 70% of the respondents
where 1 represented strongly agree and 7 strongly
were small companies with less than 49 employees
disagree. Four different types of variables (e.g. depen
and revenue of 2–10 million euros, while the rest were
dent, mediating, independent, and control variables)
medium-sized companies with 50–249 employees
were developed, each of which was measured by
and 10–50 million euros revenue. Approximately
multiple items. Referring to the dependent variable,
42% of the respondents were operating in manufac
‘Industry 4.0 maturity’ was applied as a single depen
turing companies, while 57% of the respondents were
dent variable, which was assessed using four items.
in service companies and about 1% without any
The mediating variable ‘Digital governance’ was
responses.
assessed with six items. In terms of independent vari
Different statistical and nonstatistical tests were
ables, ‘Diagnostic use of a PMS’ and ‘Interactive use of
conducted to minimize the potential bias of the
a PMS’ were two independent variables, with the
research. Potential bias was detected beforehand by
former assessed by six items and the latter by three
defining the target population and sampling frame
items. Two control variables – company size and
carefully and by matching these two. The survey was
industry – were used to control the confounding out
made as short and accessible as possible to increase
comes. Company size was represented by number of
the possibilities of gaining responses. We also sent
employees and controlled by dummy variables split
several reminders to nonrespondents to avoid the
up into small- and medium-sized companies.
possibility of self-selection bias. In terms of statistical
Likewise, industry was controlled by a dummy vari
tests, an analysis of variance (ANOVA) test was imple
able asking the respondents whether they operated
mented to check if there were any significant differ
in the service industry or manufacturing. Table 2 pro
ences between the respondents who answered the
vides the details of each measurement item and the
survey before the first reminder and those who
references.
answered the survey after the last reminder. The
results of the ANOVA tests confirmed that there was
no nonresponse bias because the differences 5. Results and analysis
between two groups were insignificant (Armstrong
5.1. Results of validity and reliability
and Overton 1977). Furthermore, Harman’s single fac
tor test was applied to check whether the research The validity and reliability of the construct are impor
suffered from common method bias (Podsakoff et al. tant factors for testing the hypotheses. The combina
2003). The results of exploratory factor analysis of all tion of different criteria was used to confirm that the
the utilized items confirmed that there was no issue present study did not suffer from a lack of validity and
regarding common method bias because factor ana reliability. These criteria were Cronbach’s α and com
lysis of all applied measures loaded onto more than posite reliability (CR) for the reliability of the con
one factor, and the total explained variance of one struct, average variance extracted (AVE) and
single factor was less than 40%. In terms of nonstatis standardized loadings for convergent validity, and
tical tests, some solutions, such as creating anon Fornell – Larcker criterion and Heterotrait – monotrait
ymous surveys within direct and clear questions, can ratio (HTMT) for discriminant validity. As asserted by
reduce common method bias (Podsakoff et al. 2003). Fornell and Larcker (1981), if the square root of AVE is
Because the conducted survey was anonymous and more than the correlation between the respective
different iterative sessions with experienced research construct and the remaining constructs of the
ers were organized to create direct and understand model, discriminant validity is confirmed. Table 1
able questions, the issue of common method bias was demonstrates the results of discriminant validity, con
not a major issue. firming the discriminant validity of the construct
8 M. SAUNILA ET AL.
because each value of the construct correlation is less 1981). Thus, the reliability and validity of the construct
than the diagonals. HTMT is another criterion that was confirmed based on the satisfied criteria pre
checks discriminant validity: here, the discriminant sented in Tables 1 and 2.
validity is accepted if the value of HTMT is less than
0.9 (Henseler, Ringle, and Sarstedt 2015). Because the
5.2. Results of the structural equation model
accounted value of HTMT is less than 0.9, discriminant
validity is confirmed. Structural equation model was utilized with Smart-
Reliability of the construct was checked by PLS to check the relationship between the constructs
Cronbach’s α and CR. The internal consistency and included in the proposed research model. The results
reliability of the construct were confirmed because of the structural equation model are presented in
both the value of Cronbach’s alpha and CR of all Table 3. The path from company size to Industry 4.0
constructs were more than 0.7 (Table 2) (Fornell and maturity and industry to Industry 4.0 maturity tested
Larcker 1981; Hair et al. 2009). The convergent validity the effect of the control variables on the dependent
of the construct was checked by AVE. Because the variable. As shown in Table 3, the company size did
value of AVE for all constructs was more than the not significantly affect Industry 4.0 maturity (β =
threshold of 0.5 (Table 2), the convergent validity of 0.779, P-value = 0.436, insignificant). Likewise, the
the construct was confirmed (Fornell and Larcker industry did not significantly affect the Industry 4.0
INTERNATIONAL JOURNAL OF COMPUTER INTEGRATED MANUFACTURING 9
maturity (β = 1.935, P-value = 0.054, insignificant). the effect of interactive use of a PMS on digital gov
Thus, none of the control variables significantly ernance was positively significant (β = 5.649, P-value
affected Industry 4.0 maturity. The path from diagnos = 0.000, significant at the 0.001 level), and the effect
tic use of a PMS to Industry 4.0 maturity and inter of digital governance on Industry 4.0 maturity was
active use of a PMS to Industry 4.0 maturity tested the significant (β = 3.823, P-value = 0.000, significant at
effects of independent variables on the dependent the 0.001 level). Thus, H2b was accepted, and digital
variable (H1a and H1b). As shown in Table 3, the governance positively mediated the relationship
diagnostic use of a PMS did not significantly affect between the interactive use of a PMS and Industry
Industry 4.0 maturity (β = 0.708, P-value = 0.479, insig 4.0 maturity. Consequently, both parts of the second
nificant). Thus, H1a was rejected. Likewise, the inter hypothesis (H2a and H2b) were accepted.
active use of a PMS did not significantly affect
Industry 4.0 maturity (β = 1.034, P-value = 0.302, insig
6. Discussion
nificant). Therefore, H1b was also rejected.
Consequently, none of the dependent variables sig The aim of the present study was to investigate the
nificantly affected Industry 4.0 maturity, and both effect of digital governance on Industry 4.0 maturity,
parts of the first hypothesis (H1a and H1b) were along with its mediating role on the relationship
rejected. between the use of PMSs (diagnostic and interactive)
The path from the diagnostic use of PMSs to digital and Industry 4.0 maturity. Regarding the direct effects
governance, interactive use of PMSs to digital govern of diagnostic and interactive use of a PMS on Industry
ance, and digital governance to Industry 4.0 maturity 4.0 maturity, no significant effects were found. This
tested the effect of the independent variable on the result is, to some extent, contradictory with prior
mediating variable and the effect of the mediating studies, which show that PMSs are beneficial in
variable on the dependent variable. According to Industry 4.0 maturity (Frederico et al. 2020; Horváth
Baron and Kenny (1986), the mediating effect was and Szabó 2019; Kamble et al. 2020). However, these
confirmed if the direct effect of the independent studies have specific features that allow for positive
variable on the dependent variable was not statisti effects. For example, Horváth and Szabó (2019) high
cally significant, but both the direct effect of the light the increased managerial emphasis on PMSs,
mediating variable on the dependent variable and increased control, and permitting real-time perfor
direct effect of the independent variable on the med mance measurement as the drivers for the maturity
iating variable were statistically significant. As demon of Industry 4.0. Frederico et al. (2020) also highlight
strated in Table 3, the effect of diagnostic use of the managerial viewpoint of a PMS in the maturity of
a PMS on digital governance was negatively signifi Industry 4.0 in supply chains, where the monitoring
cant (β = 2.010, P-value = 0.045, significant at the 0.05 purpose of diagnostic use helps managers track the
level), and the effect of digital governance on Industry progress of the company toward goals and monitor
4.0 maturity was significant (β = 3.823, P-value = the results (cf. Henri 2006b). Consequently, the con
0.000, significant at the 0.001 level). Thus, H2a was trasting results of this study may be because in pre
accepted, and digital governance negatively vious studies (e.g. Frederico et al. 2020; Horváth and
mediated the relationship between the diagnostic Szabó 2019), PMSs have already included the ele
use of a PMS and Industry 4.0 maturity. In addition, ments of digital governance, such as digital
10 M. SAUNILA ET AL.
leadership, support from managers and employees, which drives Industry 4.0 maturity. The maturity of
eagerness to learn digital skills and initiatives to use Industry 4.0 requires agility, various skills, and quick
digital technologies as new ways of working (Chen reactions to changes that can be addressed by digital
2017; El Sawy et al. 2016; Sia, Soh, and Weill 2016). governance, such as the ability and engagement of
Regarding the interactive use of a PMS, Klovienė and managers and employees, the ability and readiness to
Uosytė (2019) present that transformations in tech utilize new technologies, and the ability to collabo
nology, the business environment, and organizational rate in digital platforms (Chen 2017; El Sawy et al.
processes force the development of PMSs in a way so 2016; Sia, Soh, and Weill 2016). The current study
that a PMS can provide a rapid reactive ability, which has also indicated that the diagnostic use of a PMS
is crucial in the maturity of Industry 4.0. However, negatively affects digital governance. Because the
based on the current research, the diagnostic or inter diagnostic use of a PMS refers to a group of formal
active use of PMSs alone does not seem to facilitate processes, including monitoring systems, reporting
Industry 4.0 maturity. This may indicate that, if the tools, and performance outcomes (Henri 2006a;
management engagement and real-time perfor Koufteros, Verghese, and Lucianetti 2014), moving
mance measurement of PMSs are not at an adequate from rigorous metrics to evaluation and assessment
level, it will not enable rapid reactions and successful (i.e. digital governance) may lead to resistance to
Industry 4.0 maturity. This may also indicate that both change. This is also supported by Nudurupati et al.
the diagnostic and interactive use of a PMS are still (2016), who study performance measurement and
based on measures calculated from historical data management in digital economies, highlighting orga
and, thus, do not promote the maturity of such nizations’ need to move from measurement to eva
a diverse and extensive entity as Industry 4.0. Thus, luation, especially when collaborating on global
the result highlights the need for digital governance, networks. Furthermore, the diagnostic use of a PMS
where the digitization of manufacturing has opened may lack the proactive nature of measurement
several opportunities to monitor, control, optimize needed in digital governance. The updates in
and manage various information-intensive processes Industry 4.0 are so fast that diagnostic use is not
to improve real-time decision-making support and useful because the updates in the criteria of the diag
problem solving, as Cheng and Bateman (2008) and nostic PMS take time and need to be changed
Katchasuwanmanee et al. (2016) have suggested. regularly.
As predicted, digital governance had a direct effect
on Industry 4.0 maturity. The evidence here suggests
7. Conclusion
that the concept of digital governance has an impor
tant role to play in managing Industry 4.0. The find The present study has explored the impact of differ
ings provide evidence that digital governance allows ent types of PMS use (diagnostic use and interactive
digital leadership and access to top managers with use) on Industry 4.0 maturity, investigating whether
the full support and initiatives about using digitaliza digital governance mediates the effect of PMS use on
tion and digital technology as a new way of working, Industry 4.0 maturity. The results provide new insights
such as digital solutions, digital networks, and digital for both academics and practitioners. From the view
platforms (El Sawy et al. 2016), in turn leading to point of academics, the current research has revealed
enhanced Industry 4.0 maturity. The study also inves how different types of PMS use can lead to Industry
tigates whether digital governance facilitates the rela 4.0 maturity. In addition, different types of PMS use
tionship between the diagnostic and interactive use (diagnostic use and interactive use) are more prone to
of PMSs and Industry 4.0 maturity; the results indicate significantly impact Industry 4.0 maturity through
that the interactive use of PMSs positively affects digital governance. However, the diagnostic use of
Industry 4.0 maturity via digital governance. When a PMS significantly hinders digital governance, while
the interactive use of a PMS encompasses learning, the interactive use of a PMS significantly drives digital
communication, and interaction to enable the room governance. Furthermore, digital governance facili
to generate new ideas and initiatives (Franco‐Santos tates Industry 4.0 maturity. As the greatest novelty,
et al. 2007; Guenther and Heinicke 2019; Henri 2006b), the study contributes to manufacturing research
it also seems to allow for room for digital governance, streams, especially to Industry 4.0 and smart
INTERNATIONAL JOURNAL OF COMPUTER INTEGRATED MANUFACTURING 11
manufacturing, by showing how the appropriate use time; hence, there is the potential for more research
of PMSs together with digital governance can achieve using longitude data. Second, the data were gath
the maturity of industry 4.0. The novelty and impor ered in a single country (Finland), which might pose
tance of the study are emphasized, especially, when the possibility for a lack of generalizability.
commonly known that PMSs are the most important However, this has also provided an opportunity to
management tools of companies and that the exis implement the present research in different coun
tence of emerging technologies at the core of tries with different cultures and to understand if the
Industry 4.0 increases the complexity of this phenom same results will be attained. Third, because the
enon, highlighting the need for a specific approach results of the current study are based on the per
and method to adopting Industry 4.0. The study also spectives of the CEO of the SMEs, there is the pos
contributes to the literature on performance mea sibility for bias, which is not the case in the current
surement systems, especially in a manufacturing study because of all the conducted statistical and
environment. nonstatistical remedies. This limitation can also
From the viewpoint of practitioners, solely apply become an opportunity for more research within
ing a PMS within different types of use will not different staff members of the company to better
provide Industry 4.0 maturity; however, there is understand their viewpoints about different types
a need for digital governance to synchronize the of PMS use in Industry 4.0 maturity.
relationship between the type of PMS use and
Industry 4.0 maturity. Thus, practitioners who want
to utilize PMSs within different types of use should Disclosure statement
add digital governance criteria in their business to No potential conflict of interest was reported by the author(s).
enhance Industry 4.0 maturity. Additionally, the
mediating effects of digital governance between
different types of PMS use (diagnostic use and inter ORCID
active use) and Industry 4.0 maturity are different;
Minna Saunila http://orcid.org/0000-0001-8952-6102
therefore, practitioners should be careful when Juhani Ukko http://orcid.org/0000-0002-9256-1555
using digital governance in different types of PMS Mina Nasiri http://orcid.org/0000-0003-2353-7487
use to adopt Industry 4.0. When it comes to using Patrizia Garengo http://orcid.org/0000-0002-7581-6149
PMS as a diagnostic purpose, it will affect digital
governance negatively, but when it comes to
using a PMS as an interactive purpose, it will affect Availability of data and materials
digital governance positively. SMEs should utilize The authors do not have permission to share data.
PMS interactively to facilitate digital governance
and further Industry 4.0 maturity. This means utiliz
ing performance measures for learning and commu Consent for publication
nication purposes. Utilizing performance measures
approved
just for tracking the progress toward goals or mon
itoring and justifying decisions will have negative
influence on digital governance. Thus, SMEs that Ethics approval and consent to participate
want to benefit from digital governance in
Industry 4.0 maturity should consider the role of Accepted principles of ethical and professional conduct have
been followed.
PMSs as both a booster and hinderance.
However, like any other research, the present
study has some limitations that can be used as References
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