Industrial Marketing Management 95 (2021) 54–64

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Industrial Marketing Management

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Research paper

Environmental dynamism, industry 4.0 and performance: Mediating role of

organizational and technological factors
Saurabh Kumar a, Manjot Singh Bhatia b, *
a
Indian Institute of Management Indore, Indore, India
b
Jindal Global Business School, O. P. Jindal Global University, India

A R T I C L E I N F O A B S T R A C T

Keywords: Industry 4.0 (I4.0) has gained a lot of consideration as it can address the challenges of today’s dynamic
Industry 4.0 manufacturing environment. This paper empirically examines whether environmental dynamism (ED) can drive
Organizational firms to implement I4.0 technologies, and mediating effect of critical factors on this relationship. We adopt
Technological
“Human-Organization-Technology” (HOT) theory to categorize the critical factors for I4.0. The paper also ex­
Market performance
amines the effect of I4.0 on environmental and market performance. The proposed framework is tested by partial
Environmental performance
Environmental dynamism least squares (PLS) using the survey data from Indian manufacturing industries. The results show that ED drives
firms towards I4.0, and positive effect of I4.0 on performance outcomes. Further, organizational and techno­
logical factors mediate the relationship between ED and I4.0. The findings can be useful for firms considering to
make a transition towards I4.0. It can aid managers to formulate specific strategies for transitioning to I4.0,
contribute towards sustainable development, and improve market performance.

1. Introduction Ramos, 2017; Ritter & Pedersen, 2020). I4.0 is “a new approach for
controlling production processes by providing real time synchronization
Firms are currently going through a transformation phase, in which of flows and by enabling the unitary and customized fabrication of
the manufacturing systems are expected to be automated, autonomous products” (Kohler & Weisz, 2016). I4.0 involves technologies such as
and intelligent (Schumacher, Erol, & Sihn, 2016). The key drivers for cyber-physical systems (CPS), internet of things (IoT), cloud computing,
this transformation include resource scarcity, change in market de­ big data, etc. (Fatorachian & Kazemi, 2018; Luthra, Kumar, Zavadskas,
mographics and globalization (Prause & Weigand, 2016). Some other Mangla, & Garza-Reyes, 2020). These technologies gather and analyze
factors which have driven this change include global market competi­ real time data, thus providing key information to the systems (Wang,
tion, shorter product lifecycles, changes in customer requirements, etc. Wan, Zhang, Li, & Zhang, 2016). They help in the diffusion of infor­
(Fatorachian & Kazemi, 2018). Digital era has also increased the ex­ mation real-time, thereby enabling control of operations according to
pectations of customers, who demand innovative and customized the variation in market demand (Moeuf, Pellerin, Lamouri, Tamayo-
products at a fast pace (Gillani, Chatha, Jajja, & Farooq, 2020). In this Giraldo, & Barbaray, 2018). I4.0 technologies can disrupt customary
regard, firms have now begun to adopt new technologies so as to provide approach towards production planning and control. They can also
customers with products at lower costs, more customization and higher facilitate in the efficient allocation of resources through real-time in­
volumes (das Neves, Marins, Akabane, & Kanaane, 2015). The core idea formation exchange, thereby contributing towards sustainable devel­
about the implementation of these new technologies is to ensure digi­ opment (Stock & Seliger, 2016), and improved market performance (Li,
tization, and extensive connectivity of the manufacturing systems such Dai, & Cui, 2020).
that the production processes are streamlined, resulting in improved Organizations take actions and implement new strategies in response
decision making (Bechtold, Kern, Lauenstein, & Bernhofer, 2014). to external as well as internal contingency factors (Powell, 1992). The
To overcome the above-mentioned challenges, Industry 4.0 (I4.0) adoption of new technologies and processes largely depends on the
(“fourth industrial revolution”) has received increased consideration environment in which a firm is operational (Gillani et al., 2020). With
among the academicians and professionals (Liao, Deschamps, Loures, & regard to the external factors, the implementation of firms’ strategies

* Corresponding author.
E-mail addresses: saurabhkumar@[Link] (S. Kumar), msbhatia@[Link] (M.S. Bhatia).

[Link]
Received 29 December 2020; Received in revised form 9 March 2021; Accepted 31 March 2021
Available online 8 April 2021
0019-8501/© 2021 Elsevier Inc. All rights reserved.
S. Kumar and M.S. Bhatia Industrial Marketing Management 95 (2021) 54–64

can be influenced by regulations, competitive pressures, changes in more empirical studies are required to understand the potential benefits
customer demands, etc. (Jayaram, Oke, & Prajogo, 2014). Given that the of I4.0 technologies using the survey data, and to reach a conclusive
organizations have several options and may adopt distinct strategies to agreement on potential benefits of I4.0 technologies (Dalenogare et al.,
improve performance outcomes, it is crucial to understand why firms 2018; Li et al., 2020). Exploring the relationships between I4.0 tech­
would adopt I4.0 technologies to improve performance. Today, firms are nologies and performance outcomes will help managers in the
facing high level of market dynamism owing to frequent changes in the manufacturing firms to understand more about the benefits of I4.0
demand of customers, shorter product lifecycles, changes in government (Gillani et al., 2020), and how I4.0 can contribute to sustainable
regulations, increase in rate of innovation, etc. (Chan, Yee, Dai, & Lim, development and help firms to achieve superior market performance.
2016; Li et al., 2020). Environmental dynamism (ED) refers to “the Therefore, our third objective is to explore the effect of I4.0 on envi­
instability or volatility of a firm’s environment” (Li et al., 2020), and has ronmental and market performance.
been recognised as one of the key situational elements in dynamic ca­ In nutshell, this study answers the following questions:
pabilities theory (Eisenhardt & Martin, 2000). To operate in a dynamic
market environment and sustain competitive advantage, firms need to 1. Does ED influences firms towards the transition to I4.0?
upgrade in terms of technologies to maintain the level of fit (Arvanitis & 2. What is the role of critical factors on relationship between ED and
Hollenstein, 2001). Organizations adept in the latest technologies and I4.0?
vigilant of the changes in the market can remain more competitive 3. What is the effect of I4.0 on environmental and market performance?
(Dosi, Ermoliev, & Kaniovski, 1994). I4.0 technologies can help firms to
sustain in a dynamic market environment through reconfiguration and The proposed framework is tested using the data collected from In­
optimization of processes, and provide customized, high quality and low dian manufacturing firms by partial least squares (PLS). The study is
cost products to customers, besides addressing the environmental con­ conducted in Indian manufacturing industry because India is one of the
cerns. This can also aid marketing managers to provide well balanced fast growing economy,1 and has now become a favorable destination for
solutions on new product offerings to the customers (Zolfani, Zavadskas, investments by overseas manufacturing firms. By 2025, the
& Turskis, 2013). Therefore, we posit that ED can drive firms to adopt manufacturing sector in India has the potential to reach US $1 trillion.2
I4.0 technologies to achieve desired performance outcomes. In this re­ Government of India has started several initiatives such as “Make in
gard, our first objective is to examine the effect of ED on I4.0 India”, which aims to fasten the adoption of I4.0 technologies.3 Indian
technologies. manufacturing firms are already moving towards the adoption of I4.0
I4.0 technologies have a very complex nature (Lee, Bagheri, & Kao, technologies and embracing the benefits. However, the transformation
2015); thus the implementation of these technologies is a matter of has just begun, and it’s still a long way to go in this transformation. Thus,
concern. There are several barriers to the effective adoption of I4.0 it is important that firms respond to the dynamism in the industry and
technologies (Kamble, Gunasekaran, & Gawankar, 2018; Raj, Dwivedi, focus on certain critical factors for successful transition towards I4.0.
Sharma, de Sousa Jabbour, & Rajak, 2020). Therefore, firms need to Further, it is also vital that the firms understand the potential benefits of
focus on critical factors which can enable the successful adoption of I4.0 I4.0. Thus, the proposed framework is tested in the context of Indian
technologies. As research on I4.0 is still in its infancy, the literature lacks manufacturing firms. The findings may be useful for firms which have
in the understanding of key factors for I4.0 (Gillani et al., 2020). recently initiated the transformation towards I4.0 and firms which are
Recently, there have been few studies which have discussed about the still in the planning phase of this transition.
antecedents and drivers of I4.0 technologies (Jabbour, Jabbour, For­ In Section 2, we discuss the underpinning theories and subsequently
opon, & Godinho Filho, 2018; Luthra et al., 2020; Moeuf et al., 2020; develop hypotheses. Section 3 presents the methodology, and in Section
Sony & Naik, 2019; Sony & Naik, 2020). However, these studies are 4, we provide the findings. In Section 5, implications are discussed and
based on literature review, discussion or case study approach, using the Section 6 highlights conclusions and future directions.
inputs from very few number of experts. The case study approach has a
limitation that it restricts the generalization of results (Merriam, 1985). 2. Literature review
Therefore, the factors which drive effective implementation of I4.0
technologies still requires further research (Dalenogare, Benitez, Ayala, 2.1. Theoretical background
& Frank, 2018), using the empirical methodology or survey data (Koh,
Orzes, & Jia, 2019). In this study, we specifically propose that in a dy­ Several studies in literature on antecedents of adoption of technol­
namic market environment, firms need to focus on critical factors for ogies have used HOT framework. The HOT framework stands for
transitioning towards I4.0. Therefore, our second objective is to analyze “Human–Organization–Technology” and was initially established for
the mediating effect of critical factors between ED and I4.0. We cate­ usage in health information systems (Yusof, Papazafeiropoulou, Paul, &
gorize the critical factors based on “Human-Organization-Technology” Stergioulas, 2008). The HOT framework postulates that higher the fit
(HOT) theory, and accordingly propose three factors (Organizational, among human, organization and technology factors, better is the po­
human, and technological), which can mediate the relationship between tential of the exploitation of the technology in use. In the present
ED and I4.0. context, I4.0 technologies are the ones in usage. The human factors
According to a survey by McKinsey, though manufacturing organi­ include user satisfaction and system usage. The organizational factors
zations have awareness on the significance of I4.0 technologies, they still include environment and structure, whereas the technology factors
have a lot of uncertainty on I4.0 technologies due to its potential im­ include system quality, service quality and information quality. The
plications (Breunig, Kelly, Mathis, & Wee, 2016). Several studies have HOT framework has been earlier used by various researchers to identify
discussed about the potential positive effect of I4.0 on environmental the critical factors impacting the organization’s decisions (Ahmadi,
and market performance (Jabbour et al., 2018; Kagermann, Helbig, Nilashi, & Ibrahim, 2015; Nilashi, Ahmadi, Ahani, Ravangard, & bin
Hellinger, & Wahlster, 2013; Kamble, Gunasekaran, & Sharma, 2018;
Machado, Winroth, & Ribeiro da Silva, 2020; Rosa, Sassanelli, Urbinati,
Chiaroni, & Terzi, 2020; Stock & Seliger, 2016). There has been a recent 1
[Link]
empirical study by Li et al. (2020), which examined the effect of I4.0
r-economy-in-the-world/ (Accessed 16th December 2020)
technologies on economic and environmental performance in 2
[Link] (Accessed
manufacturing firms in China. However, digital technologies can also 9th December 2020)
increase competition among the businesses, and thus put environmental 3
[Link]
and economic burdens on firms (Kiel, Arnold, & Voigt, 2017). Therefore, industry-4-0-and-india (Accessed 9th December 2020)

55
S. Kumar and M.S. Bhatia Industrial Marketing Management 95 (2021) 54–64

Ibrahim, O., 2016). The HOT framework has also been extensively used 2.2. Hypotheses development
in different contexts such as antecedents of cyber-security (Kumar,
Biswas, Bhatia, & Dora, 2020), and critical factors of social media for 2.2.1. Environmental dynamism - industry 4.0 and critical factors
supply chain social sustainability (Orji, Kusi-Sarpong, & Gupta, 2020). The contingency theory posits that organizations act and implement
strategies in response to internal as well as external environment
2.1.1. Human factors (Donaldson, 2001). Some of the scholars argue that contingencies play
Human factors are essential for any organization because these play a an important part in achieving competitive advantage for an organiza­
major role in strategic decision making, and are responsible for overall tion, through bundling of capabilities and resources (Sirmon & Hitt,
growth of the organizations. It includes factors such as support of top 2009). The development of contingency theory is particularly useful to
management, strategic leadership, collaboration among employees, explain how the dynamic capabilities may provide value to the organi­
motivation to excel in the job, and so on (Shao, 2019). Various studies zation (Aragón-Correa & Sharma, 2003; Schilke, 2014). Previous studies
have analyzed the importance of human in the technological advance­ in literature have discussed that firms position their strategic orientation
ment of an organization (Gupta & Misra, 2016). The study focused on according to the market environmental dynamics (Cao, Baker, & Hoff­
important factors related to human resource which help organizations to man, 2012). ED is the extent to which an external environment is
grow and which cannot be easily imitated by the competitors. Such characterized by “change in technologies, variations in customer pref­
factors include trust with vendors, appropriate training of employees erences, and fluctuations in product demand or supply of materials”
and the involvement of employees/ stakeholders in the decision-making, (Jansen, Van Den Bosch, & Volberda, 2006). In nutshell, ED refers to the
and so on. Any technology is not useful unless an active manager is able change, instability or volatility in the environment (Dess & Beard,
to extract meaningful insights from the technology and take appropriate 1984). The recent years have seen several changes in the environment
decisions. Organizations which demonstrate the effective decision which include frequent changes in the market demand, government
making by its managers are able to show significant growth and regulations on waste, high rate of innovation, etc. (Fatorachian &
outstanding performance (Gupta, Drave, Dwivedi, Baabdullah, & Kazemi, 2018). In such environments, firms need to focus on systems
Ismagilova, 2020). and implement the technologies which can help to manage the expec­
tations of the external environment / changes in market (Brettel, Frie­
2.1.2. Organizational factors derichsen, Keller, & Rosenberg, 2014).
Organizational structure is very important for any business to carry I4.0 technologies such as IoT, and CPS enable integration and
out operational tasks and provide internal strength. An effective orga­ communication among the production systems (Cheng, Farooq, &
nizational structure provides process standardization, flexibility in op­ Johansen, 2015; Reinhart et al., 2013). I4.0 technologies can enable
erations, technological specialization and formalization of workflow higher flexibility and quick facilitation of changes in the processes,
inside an organization (Pugh, Hickson, Hinings, & Turner, 1968). In which can ultimately help to respond quickly to the changes in demand
order to build sustainable performance for any organization, there is a of the customers. It can facilitate the manufacturing of customized
need of an adequate blending of organizational capabilities and re­ products, and ensure quality and profitability (Fatorachian & Kazemi,
sources to maintain the equilibrium between operational and economic 2018). I4.0 technologies also support in achieving the sustainability
performance (Székely & Knirsch, 2005). The sustainability of the orga­ through optimization of consumption of energy and resources (Kager­
nizations depends on factors such as market performance, financial mann et al., 2013). These technologies also support firms in adopting
performance and operational performance. Industrial revolutions de­ circular economy initiatives (Machado et al., 2020), which can aid in
mand not only the advancement of technical skills but also, it should be minimization of waste and increase the efficiency of resources. There­
augmented by the organizational thinking and its related factors. fore, I4.0 technologies can indirectly also support in meeting the gov­
Organizational factors along with progressive working policies can lead ernment regulations on waste, cleaner production, recycling, etc. With
a company to acquire human resources, who are smart and intelligent reference to the above discussion, we postulate:
and who can assist in the advancement of technological leadership of the
Hypothesis H1. ED is positively related to adoption of I4.0
organizations (Gupta, Meissonier, Drave, & Roubaud, 2020).
technologies.
2.1.3. Technological factors In a dynamic and volatile environment, firms need to focus on
Technological factors in the organizations refers to the complete certain critical factors which can aid to effectively transit towards I4.0.
understanding of a particular technology and having an expertise in According to Van Bullen and Rockart (1986), critical success factors
dealing with a particular technology (Gupta, Drave, et al., 2020). Those (CSFs) are “the limited number of areas in which satisfactory results will
technologies include an expertise in artificial intelligence, machine ensure successful competitive performance for the individual, depart­
learning, blockchain, data science and deeper understanding of pro­ ment, or organization. CSFs are the few key areas where ‘things must go
gramming languages (Davenport, 2014). Most of the organizations are right’ for the business to flourish and for the manager’s goals to be
unable to adopt and exploit a particular emerging technology. This is attained”. The management processes and decision making becomes
mainly because the organizations procure a particular technology complex when several factors are taken into consideration (Kannan,
without giving a second thought that whether the particular technology 2018). However, focusing only on the certain critical factors can help
is going to assist them in the business or not. They procure the tech­ firms to achieve the desired outcomes (Bai & Sarkis, 2013; Brotherton,
nology because their competitors have bought them or the particular 2004). The critical factors generally include internal features in a firm’s
technology is a buzzword at the time of adoption. Studies have found environment such as people, processes, structures, etc. “CSFs are the
that it is not only the technology that will help the organizations, but the indispensable business, technology, and human factors that help to
alignment of the technology with the business which is most important achieve the desired level of organizational goals” (Turban, Lee, King, &
for any business (Gupta & George, 2016). The employees need to be Chung, 2000). Critical factors reflect the competencies and capabilities
trained for using a particular technology and developing analytical of a firm, which are critical for implementation and operations of sys­
thinking (Prescott, 2014). This needs to be carried out in addition to the tems (Berry, Seiders, & Gresham, 1997; Duchessi, Schaninger, & Hobbs,
technology and related technological advancements; only then the 1989). The critical factors for adopting certain systems in a firm is also
appropriate results can be achieved (Dubey et al., 2019). contingent upon the external environment faced by an organization
(Brotherton, 2004). For implementing the I4.0 technologies, firms may
need to focus on factors such as “organizational leadership”, “informa­
tion and technological infrastructure”, “involvement of workforce”,

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S. Kumar and M.S. Bhatia Industrial Marketing Management 95 (2021) 54–64

“Adoption of innovative business models”, etc. (Bhatia & Kumar, 2020; in new technologies to satisfy demands of the customers (Pan & Li,
Luthra et al., 2020). With change in external environment, firms need to 2016). Sophisticated developments related to technology can also help
critical factors, which can further aid in adopting I4.0 technologies to improve processes and manufacture products, which contribute to­
(Gillani et al., 2020). This study uses HOT framework to examine the wards sustainable development (Agostini & Filippini, 2019). Thus, we
effect of enabling factors (Human, organizational, and technological) in posit:
the interplay between ED and I4.0. In this regard, we postulate:
Hypothesis H5. Technological factors have positive effect on imple­
Hypothesis H2. Environment dynamism has positive effect on (a) mentation of I4.0 technologies.
organizational factors (b) human factors (c) technological factors.
2.2.5. Industry 4.0 and performance
2.2.2. Organizational factors and industry 4.0 Today, there are several concerns related to environment around the
I4.0 is changing the way of working in organizations. From an world, and thus there is requirement to choose appropriate technologies
organizational point of view, I4.0 era comprises making a number of (Bagočius, Zavadskas, & Turskis, 2014). I4.0 technologies can improve
changes in a firm (Bhatia & Kumar, 2020). Jabbour et al. (2018) pointed environmental and economic performance outcomes, and contribute
out “resistance to change by employees” to be a major barrier towards towards sustainable development goals (Jabbour et al., 2018). With
transitioning to I4.0. Thus, an organization needs to be flexible and be respect of the environmental performance, I4.0 technologies can pro­
ready for change to successfully adopt I4.0 technologies. In this regard, vide efficient solutions for sustainable processes and product designs,
support and commitment of top managers become quite important. The resulting in the minimum consumption of natural resources and reduc­
leadership style of the management can bring about the trans­ tion of pollutants (Li et al., 2020). Technologies such as IoT, BDA, and
formational change required to move towards I4.0 era (Shao, Feng, & cloud computing enhance the flow of information and facilitate eco-
Hu, 2017). Leadership with a transformational thinking can motivate design and sustainable product innovation (Dubey et al., 2019). The
employees to work successful towards the transition to I4.0. For effective digital technologies can also aid in collecting and processing the infor­
implementation and achieve the desired outcomes, mangers also need mation, which can be used for controlling the quality of water, air
be aware about the expected benefits, which will help them to make pollution, and energy efficiency, through automatic optimization of
appropriate strategies. Finally, proactive behavior of employees is an manufacturing processes (Junior, Busso, Gobbo, & Carreão, 2018).
organizational competency required for transition to I4.0 era (Gillani Firms can embed RFID technologies and sensors in the manufacturing
et al., 2020). Therefore, we posit: equipment, which can regulate the environmental parameters in real
time (Li et al., 2020). Thus, I4.0 technologies can facilitate the control of
Hypothesis H3. Organizational factors have positive effect on I4.0
air pollution, quality of water, and energy efficiency.
technologies.
I4.0 technologies such as IoT enable high level of technological
innovation through enhanced integration of manufacturing systems
2.2.3. Human factors and industry 4.0
among themselves and with the internet (Li, Nucciarelli, Roden, &
It is expected that manufacturing firms would be influenced by the
Graham, 2016). This enhanced integration can help to improve the
factors related to the human aspects. Firstly, employees need to be
approach to development, design and manufacturing of products, which
trained to equip them with relevant knowledge and provide necessary
can result in cost savings, improvement in efficiency and growth of
skills for working effectively with the I4.0 technologies (Waibel,
revenue (Zhong, Xu, Chen, & Huang, 2017), ultimately improving
Steenkamp, Moloko, & Oosthuizen, 2017). Sarkis, Gonzalez-Torre, and
market performance. I4.0 technologies can help to make decisions on
Adenso-Diaz (2010) found training as an important factor required for
development of products, price optimization and forecasting, thus
environmental management practices, which is also the case with I4.0
satisfying the demands of the customers in a better way and increase
technologies. Secondly, teamwork is a crucial factor for successful
sales and market share (Joshi & Gupta, 2019; Li et al., 2020). These
adoption with I4.0 technologies. Teamwork is important for problem
technologies enable firms to reconfigure production resources for
solving especially in new projects and achieving desired outcomes. In
manufacturing of customized products efficiently and with flexibility
I4.0 era, systems are integrated both vertically as well as horizontally
(Dalenogare et al., 2018). Finally, through efficient processing of in­
(Jabbour et al., 2018), which means supply chain entities and organi­
formation, I4.0 technologies can also help to make decisions related to
zational units will be inter-connected, which necessitates teamwork
production (Nguyen, Li, Spiegler, Ieromonachou, & Lin, 2018), which
(Stock & Seliger, 2016). In this regard, we postulate the following:
can increase operational efficiency, reduce costs and increase profit­
Hypothesis H4. Human factors have positive effect on I4.0 ability. In this regard, we postulate:
technologies.
Hypothesis H6. I4.0 technologies positively influence market
performance.
2.2.4. Technological factors and industry 4.0
I4.0 technologies function in a desired way only if the appropriate Hypothesis H7. I4.0 technologies positively influence environmental
supportive mechanisms are put up (Gillani et al., 2020). The performance.
manufacturing processes necessitate that digital technologies use digital
models as input through software and hardware, and then 3. Methodology
manufacturing can be facilitated. I4.0 need advanced manufacturing
technologies related to planning and design, which can provide 3.1. Instrument development
comprehensive details on products (Yu, Xu, & Lu, 2015). The use of such
novel technologies is only possible through integration of operational We used questionnaire based survey approach for the collection of
processes and the associated technologies. The integration of design and data. The proposed framework consists of the following latent variables:
manufacturing entails “rapid information dissemination and decision ED, critical factors of I4.0 (organizational, human, and technological),
making enabled by coordination and utilization of joint wisdom” (Gil­ I4.0, and performance outcomes. The proposed framework is shown in
lani et al., 2020). Firms should also focus on process innovations, which Fig. 1. The items for the construct “I4.0” are measured by 5-point scale
can help them in reconfiguration, exploitation, and maximization of (1: “not used”; 5: “fully adopted”). The items intend to measure the
resources and capabilities, ultimately enhancing efficiency of operations “level of implementation” in firms and represent the maturity level in
and reduction of costs (Salerno, de Vasconcelos Gomes, da Silva, Bagno, terms of sufficient preparations on implementation of technologies
& Freitas, 2015). Process innovations can also translate into investments (Kamble, Gunasekaran, & Dhone, 2020). I4.0 technologies have

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S. Kumar and M.S. Bhatia Industrial Marketing Management 95 (2021) 54–64

Fig. 1. Theoretical framework.

complex features and most of the firms are not certain about the benefits experience.
(Bibby & Dehe, 2018). Thus, the items measure the “degree of imple­
mentation” of I4.0 technologies, rather than measuring the level of 3.3. Common method bias (CMB)
success. The items for “I4.0” are adopted from the previously published
studies (Kamble et al., 2020; Tortorella, Vergara, Garza-Reyes, & We took several measures to avoid CMB to the extent possible. At the
Sawhney, 2020). The items for performance outcomes are adopted from outset, the items of independent constructs are measured before the
the following studies: market performance (Gotteland, Shock, & Sarin, dependent variables (Yadlapalli, Rahman, & Gunasekaran, 2018). In the
2020; Gunday, Ulusoy, Kilic, & Alpkan, 2011; Richey Jr, Musgrove, questionnaire, we assured the potential respondents about the ano­
Gillison, & Gabler, 2014), and environmental performance (Dubey et al., nymity of their responses, and use of responses only for the research
2019; Zhu, Sarkis, & Lai, 2008). The items for critical factors (Organi­ purpose. Further, respondents were also ensured that there is no
zational, human, and technological) are adopted from Gillani et al. particular correct answer to each question, and advised them to answer
(2020), Bhatia and Kumar (2020), and Jabbour et al. (2018). Finally, the each question based on their knowledge, rather than the feelings (Pod­
items for ED are adopted from Li et al. (2020) and Chan et al. (2016). sakoff, MacKenzie, Lee, & Podsakoff, 2003). Post data collection, we
A brief about the I4.0 technologies and key objectives are included at employed Harman’s single factor test, which explains only 29% of the
the beginning of the questionnaire. The questionnaire also included a total variance, thus indicating that CMB is not a concern (Podsakoff
specific section which captures the demographic information about the et al., 2003). We have taken level of competitive rivalry within the in­
respondents. The instrument was then pre-tested with industry experts dustry as a method variance marker variable to further assess the CMB.
and academics, and based on the experts’ feedback, the questionnaire Marker variable should be theoretically unrelated to the dependent
was iteratively modified for ensuring reliability as well as content val­ variable used in the study (Lindell & Whitney, 2001). We found the
idity. Further, to capture the effect of certain contextual variables that lowest positive correlation between the marker variable and other
may potentially affect the findings, we consider industrial sector and constructs as 0.031. This value is used in adjusting the construct cor­
firm size as control variables. Though we have considered relations and statistical significance (Sharma, Yetton, & Crawford,
manufacturing industry, firms belonging to different industry sectors 2009). The results indicate that none of the significant correlations
can behave differently with regard to I4.0. Additionally, larger firms became insignificant after adjusting. Thus, CMB is not a concern in our
generally possess more resources, and hence may be more active to­ study.
wards implementing I4.0 technologies. Industry sector and firm size
have been considered as control variables in the recent studies (Camisón
& Puig-Denia, 2016; Gillani et al., 2020; Gupta, Drave, et al., 2020). 3.4. Data analysis technique

PLS is used for testing of proposed hypotheses. PLS is generally

3.2. Data collection preferred when sample size is relatively small (such as in our study), and
data does not strictly follow normal distribution (Hair Jr., Sarstedt,
The collection of data was facilitated by a data collection firm, Ringle, & Gudergan, 2018). Further, PLS is also used when the field of
“NexGen Market Research”.4 The firm contacted 310 professionals study is not well established, and focus is on the development of theory
selected from its proprietary database. In total, 116 completed responses and variance explanation (Sreedevi & Saranga, 2017). As I4.0 is an
are received, at response rate of 37.41%, which is more than the rec­ emerging research area, and is less mature (Gillani et al., 2020), PLS is
ommended rate of 20% in questionnaire-based surveys (Malhotra & used for the testing of hypotheses in this study.
Grover, 1998). We covered multiple manufacturing industries such as
automobile (39.66%), electronics (26.72%), electrical (14.66%), plas­ 4. Findings
tics (12.07%), and textiles (6.90%). We preferred multi-industry study
as it allows the generalizability of results (Walton, Handfield, & Melnyk, 4.1. Measurement model
1998), and also allows to collect more samples for the areas in the very
early stages of practice (Kumar, Subramanian, & Arputham, 2018), such In this section, we evaluate validity and reliability of items and latent
as I4.0 technologies in an emerging economy. Our sample contains 90% variables. Firstly, we ensured reliability of items by examining the
responses from the professionals working in top and middle manage­ loadings between the items and the intended constructs. We used the
ment positions, and 10% from the professionals in lower management cutoff value for loadings equal to 0.5 (Tenenhaus, Vinzi, Chatelin, &
positions. Nearly 60% of the respondents possess more than 10 years of Lauro, 2005), and removed the items with loading values less than 0.5.
The reliability of latent variables is assessed through composite reli­
ability (CR) and convergent validity by average variance extracted
4
[Link] (AVE) (CR ≥ 0.7; AVE ≥ 0.5) (Fornell & Larcker, 1981). Table 1 depicts

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S. Kumar and M.S. Bhatia Industrial Marketing Management 95 (2021) 54–64

Table 1 Table 3
Validity and reliability. Cross-loadings.
Construct Item Loading t-value CR AVE ED OL HUM TL I4.0 MARKP ENVP

Environmental dynamism ED1 0.67 11.619 0.85 0.52 ED1 0.670 0.218 0.360 0.243 0.340 0.277 0.307
ED2 0.77 6.110 ED2 0.764 0.255 0.254 0.341 0.334 0.278 0.296
ED3 0.71 10.873 ED3 0.709 0.302 0.293 0.357 0.418 0.297 0.405
ED4 0.72 12.686 ED4 0.720 0.397 0.363 0.344 0.380 0.217 0.390
ED5 0.73 12.159 ED5 0.734 0.337 0.412 0.290 0.420 0.353 0.510
Organizational OL1 0.67 8.302 0.83 0.50 OL1 0.258 0.673 0.379 0.225 0.324 0.258 0.391
OL2 0.78 13.624 OL2 0.299 0.781 0.473 0.405 0.404 0.301 0.452
OL3 0.70 10.515 OL3 0.313 0.699 0.474 0.443 0.398 0.277 0.483
OL4 0.67 11.619 OL4 0.276 0.669 0.368 0.343 0.420 0.315 0.447
OL5 0.70 9.384 OL5 0.351 0.697 0.375 0.392 0.392 0.195 0.385
Human HUM1a – – 0.78 0.54 HUM1a – – – – – –
HUM2 0.80 18.547 HUM2 0.460 0.510 0.802 0.388 0.427 0.386 0.450
HUM3 0.74 10.930 HUM3 0.308 0.407 0.743 0.468 0.370 0.358 0.418
HUM4 0.66 5.285 HUM4 0.232 0.363 0.658 0.437 0.327 0.353 0.364
Technological TL1 0.68 6.007 0.75 0.50 TL1 0.308 0.426 0.442 0.681 0.475 0.359 0.398
TL2 0.72 13.624 TL2 0.192 0.249 0.323 0.721 0.358 0.384 0.294
TL3a – – TL3a – – – – – – –
TL4 0.71 7.794 TL4 0.387 0.386 0.414 0.705 0.450 0.312 0.440
Industry 4.0 I4.0_1 0.79 14.825 0.83 0.54 I4.0_1 0.361 0.490 0.460 0.509 0.784 0.420 0.464
I4.0_2 0.68 8.158 I4.0_2 0.310 0.365 0.325 0.413 0.679 0.513 0.349
I4.0_3 0.71 9.162 I4.0_3 0.514 0.365 0.308 0.420 0.706 0.365 0.377
I4.0_4 0.76 14.346 I4.0_4 0.379 0.394 0.400 0.473 0.759 0.414 0.470
Market performance MARKP1 0.83 16.767 0.81 0.59 MARKP1 0.308 0.381 0.489 0.493 0.576 0.826 0.409
MARKP2 0.72 6.280 MARKP2 0.324 0.288 0.341 0.369 0.352 0.720 0.411
MARKP3 0.76 9.438 MARKP3 0.291 0.170 0.258 0.229 0.355 0.756 0.381
Environmental performance ENVP1 0.78 12.928 0.75 0.51 ENVP1 0.406 0.467 0.438 0.467 0.473 0.376 0.775
ENVP2 0.67 6.916 ENVP2 0.442 0.426 0.364 0.387 0.373 0.358 0.668
ENVP3 0.69 7.234 ENVP3 0.300 0.415 0.389 0.308 0.354 0.374 0.685
ENVP4a – – ENVP4a – – – – – –
a a
Item removed. Item removed.

the item loadings, AVE, and CR values.

Table 4
Discriminant validity is analyzed by comparing square root of AVE
Hypothesis testing.
with the corresponding inter-construct correlations (Chin, 1998). The
square root of AVE of each construct is greater than the corresponding Hypothesis β t-stat p value Support? f2
inter-construct correlations, which shows acceptable discriminant val­ H1: ED → I4.0 0.248 2.817 0.005 Yes 0.090
idity (Table 2). Discriminant validity is also validated through cross- H2a: ED → OL 0.427 6.075 0.000 Yes 0.224
H2b: ED → HUM 0.471 8.520 0.000 Yes 0.286
loadings (Table 3), which show that items load higher on the intended
H2c: ED → TL 0.440 5.083 0.000 Yes 0.240
constructs. H3: OL → I4.0 0.225 2.366 0.018 Yes 0.059
H4: HUM → I4.0 0.056 0.601 0.548 No 0.003
4.2. Structural model H5: TL → I4.0 0.363 3.213 0.001 Yes 0.161
H6: I4.0 → MARKP 0.583 8.298 0.000 Yes 0.514
H7: I4.0 → ENVP 0.569 7.620 0.000 Yes 0.478
We then evaluated the path coefficients and the corresponding sig­
nificance level. Firstly, we examined for any multi-collinearity concerns
in the model. All the variance inflation factors (VIF) are lesser than 5, The effect size (f2) values help to examine the influence of a predictor
thereby eliminating any concern on multi-collinearity (Hair, Ringle, & variable on dependent variable (Ramkumar, Schoenherr, Wagner, &
Sarstedt, 2011). Hypothesis H1, H2a, H2b, H2c, H5, H6, and H7 are Jenamani, 2019). Chin, Marcolin, and Newsted (2003) pointed that even
supported at p < 0.01; while H3 supported at p < 0.05. Hypothesis H4 is small f2 values can stimulate the dependent construct in several ways.
not found to be significant at p < 0.1. The hypothesis testing results are The f2 values of all the significant relationships in our model are more
depicted in Table 4. Firm size does not have any significant effect (β = than 0.02, considered as acceptable (Cohen, 1988). The proposed model
0.001, p = 0.995) on I4.0. We have checked the effect of industry type on explains significant amount of explanatory power, as evident from the
the I4.0 and found that none of the industries have a significant effect R2 values, which range from 32% to 51% (I4.0: 51.0%; market perfor­
(Automobile: β-value = 0.33, p-value = 0.477; electrical: β-value = mance: 34%; environmental performance: 32.3%). The predictive rele­
0.132, p-value = 0.489; electronics: β-value = 0.201; p-value = 0.486; vance is examined by Stone-Geisser’s Q2 values, which are found to be
plastics: β-value = 0.12; p-value = 0.488; textiles: β-value = 0.088; p- greater than zero for all the dependent constructs (I4.0: 0.251; market
value = 0.489). performance: 0.174; environmental performance: 0.142) (Henseler,

Table 2
Fornell and Larcker criteria.
1 2 3 4 5 6 7

Environmental dynamism (1) 0.720

Organizational (2) 0.427 0.705
Human (3) 0.471 0.588 0.737
Technological (4) 0.440 0.521 0.572 0.702
Industry 4.0 (5) 0.530 0.553 0.513 0.621 0.733
Market performance (6) 0.396 0.382 0.494 0.496 0.583 0.769
Environmental performance (7) 0.539 0.614 0.560 0.552 0.569 0.517 0.711

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S. Kumar and M.S. Bhatia Industrial Marketing Management 95 (2021) 54–64

Ringle, & Sinkovics, 2009). Finally, SRMR equals 0.086, which indicates and I4.0 also indicates that organizations are driven towards strategic
adequate overall model fit (Henseler et al., 2014). changes to survive and grow in a dynamic environment (Jayaram et al.,
2014). Digital technologies can play a critical part in a dynamic envi­
4.3. Mediation analysis ronment as they can enhance the “information processing capabilities”
to respond to changes in external environment (Li et al., 2020). Such
We tested the mediation of critical factors on relationship between capabilities can aid firms to carry out operations more effectively and
ED and I4.0, using the method proposed by Baron and Kenny (1986). We efficiently (Li et al., 2020), through increase in quality and speed of
tested two models, M1 - includes only the direct relationship between ED information dissemination. I4.0 technologies also enable organizations
and I4.0, and model M2 - includes direct relationship between ED and towards responding to the increased rate of innovations in industry
I4.0, and indirect link through three critical factors. In M1, ED is posi­ (Öberg & Graham, 2016). I4.0 technologies can enhance integration
tively related to I4.0 (β = 0.512; t = 7.054; p < 0.01). In M2, the rela­ which can improve and augment the way of designing and
tionship between ED and I4.0 is significant (β = 0.248; t = 2.814; p < manufacturing of products (Li et al., 2016), and subsequently improve
0.01), and relationship between ED and three factors is also significant. efficiency, increase revenues, and provide cost benefits (Zhong et al.,
Further, the relationship between organizational factor and I4.0 is sig­ 2017). Further, I4.0 technologies can help to achieve several other
nificant (β = 0.225; t = 2.366; p < 0.05), and between technological outcomes which include compliance with government regulations on
factor and I4.0 is also significant (β = 0.363; t = 3.213; p < 0.01). The waste management, providing new and customized products to the
effect of human factor on I4.0 is not found to be statistically significant. customers, increased responsiveness, contribution towards sustainabil­
Therefore, organizational and technological factors partially mediate ity, etc.
between ED and I4.0. This shows that I4.0 technologies have a number of benefits, which
We further tested the mediation effect by Sobel (1982) test. Finally, can not only help organizations to survive but also gain competitive
we also calculated the size of the mediating effect by calculation of the advantage in a dynamic environment. The implementation of specific
variance account for (VAF), which represents ratio of indirect effect to I4.0 technologies depends on the particular goals and objectives of the
total effect (Nitzl, Roldan, & Cepeda, 2016). The VAF by organizational managers (for instance, increasing revenue and providing cost benefits)
and technological factors lies between 20% and 60%, which indicates (Turskis, Lazauskas, & Zavadskas, 2012). Hence, managers must un­
partial meditation. The results (Table 5) confirm that organizational and derstand the market environment in which they are operating and frame
technological factors partially mediate between ED and I4.0. the appropriate strategies accordingly. In a rapidly changing environ­
ment, policymakers should choose the right strategic solutions (Zavad­
skas, Turskis, Volvačiovas, & Kildiene, 2013). Importantly, managers
5. Discussion and managerial implications
can consider I4.0 technologies to improve environmental and market
performance indicators, and achieve competitive advantage. The study
This paper empirically examines whether ED as an external factor
contributes to the literature by providing an empirical evidence on ED as
influences firms to adopt I4.0 technologies, and commensurate envi­
an external antecedent to the adoption of I4.0 technologies.
ronmental and market performance. The paper also analyzes the medi­
Secondly, organizations cannot successfully adopt I4.0 technologies
ating effect of internal factors (human, organizational, and
only due to the influence of external factors, but internal factors can also
technological), between ED and I4.0, through the perspective of HOT
have a crucial role. In this regard, we tested the mediating role of critical
framework. The study has several theoretical and managerial implica­
factors between ED and I4.0 technologies. We posit that in response to
tions for firms.
ED, it is crucial for firms to focus on certain internal factors (critical
The result shows that ED is positively related to the adoption of I4.0
factors), which can support the smooth transition towards I4.0. Ac­
technologies. This indicates that in a volatile and dynamic market
cording to Gillani et al. (2020), “the lack of knowledge of the factors
environment, firms do consider I4.0 technologies to seize the opportu­
enabling digitalization poses challenges to the practitioners”. Using the
nities and achieve the desired outcomes. The finding corroborates with
survey data, our study provides empirical evidence on critical factors for
the study of Jayaram et al. (2014), who observed ED as an important
I4.0. Specifically, we propose that in response to ED, firms need to focus
external antecedent for process innovation strategies, ultimately
on certain factors for adopting I4.0 technologies.
improving business performance. The positive relationship between ED
The findings reveal that organizational and technological factors are
the most critical internal factors for I4.0 technologies. The finding res­
Table 5
onates with Luthra et al. (2020) and Yadav et al. (2020), who found
Mediation analysis.
management support to be one of the crucial factor for I4.0 technologies.
Path M1 M2 Std. Sobel VAF Result The role of top management has also been emphasized by Jabbour et al.
error test
(2018). In this respect, managers need to have awareness on the benefits
ED → 0.512** 0.248** 0.088 2.231* 0.28 Partial of I4.0 technologies (Lin, Lee, Lau, & Yang, 2018), and be proactive
I4.0 mediation
towards the implementation of I4.0 technologies. If managers have
ED → 0.427** 0.064
OL awareness and are proactive, they can also motivate and guide em­
OL → 0.225* 0.095 ployees to overcome the challenges of working in the I4.0 era. Managers
I4.0 also have the responsibility of inculcating a culture of change in an or­
ED → 0.512** 0.248** 0.088 0.600 0.096 No mediation ganization through vision (Sony & Naik, 2020), as I4.0 will involve
I4.0 radical changes.
ED → 0.471** 0.055 The findings also indicate the importance of technological factor for
OL
I4.0 technologies. Earlier, literature has discussed that firms implement
OL → 0.056 0.093
I4.0
a technology in an incremental way, and present technological state of
the firm acts as a base for implementing the new technologies (Arthur,
ED → 0.512** 0.248** 0.088 2.720** 0.36 Partial
2009; Teece, 1996). Primarily, the current technologies and processes
I4.0 mediation
ED → 0.440** 0.086 provide support for the mechanisms and the infrastructure needed to
OL support the latest technologies (Frank, Dalenogare, & Ayala, 2019). This
OL → 0.363** 0.113 implication has the reference to combinatorial technology evolution
I4.0 (CTE) perspective, according to which the new technologies will be
**p < 0.01; *p < 0.05. effective only if the existing processes and technologies align with the

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S. Kumar and M.S. Bhatia Industrial Marketing Management 95 (2021) 54–64

requirement of the new technologies (Gillani et al., 2020). For I4.0, the organizational and technological) on ED and I4.0. The proposed
adoption of front-end technologies is again dependent upon the base framework is tested using the survey data from Indian manufacturing
technologies, which form the required basic infrastructure (Frank et al., industry, and applying the PLS technique. Our results show that ED can
2019). The base technologies provide the infrastructure for the front-end drive firms to implement I4.0 technologies. The findings show that
technologies and support their appropriate functioning. This has the organizational and technological factors mediate the relationship be­
implications for managers towards implementing technologies, as they tween ED and I4.0. Finally, we also found that I4.0 technologies can lead
need to make sure that they go in the stepwise and phased imple­ to improved market and environmental performance. Interestingly, we
mentation, and must implement the technologies in congruence with the did not found significant effect of human factor on I4.0 technologies.
already existing infrastructure. The study highlights the importance of I4.0 technologies in a dynamic
The managers or organizations need to follow the inside-out approach environment, and importance of organizational and technological fac­
which puts the spotlight squarely on the business before evaluating the tors for I4.0 technologies, in response to ED.
technology landscape (McAfee, 2006). The inside-out approach focuses The study has few limitations. Firstly, our study has used cross-
on the capabilities that the technology can provide rather than on the sectional data; therefore, longitudinal studies can be done, as result of
technologies themselves. This approach is completely opposite of implementing a technology take time to occur. Secondly, the framework
outside-in approach where managers or organizations adopt a particular can be tested in firms operating in developed economies. In this study,
technology based on the view that whether their competitors are pro­ we have considered I4.0 construct as generalized; thus, studies can be
curing the particular technology or not. As I4.0 involves radical changes done on examining the enablers and outcomes of specific technologies,
in the workplace in terms of work procedures (Jabbour et al., 2018), as firms may implement only specific I4.0 technologies. Finally, studies
organizations need to adopt process innovations to develop processes can also examine the effect of other external factors such as competitive
which align with the I4.0 technologies (Luthra et al., 2020). Further, pressure on I4.0 technologies.
managers need to stop looking at technology based projects in the or­
ganization as a mere technology installation; instead, they should start Acknowledgements
looking at them as periods of organizational change that they have a
responsibility to manage. This work is supported by a seed money grant from the Indian
The results do not support the role of human factors towards the I4.0. Institute of Management Indore, (Grant No. SM/08/2020-21).
This finding differs from the study by Moeuf et al. (2020), who found
employee training to be the most critical factor for implementing I4.0 Appendix A. Constructs and items
technologies in SMEs. Similarly, Luthra et al. (2020) reported workforce
expertise to one of the important factor. A possible reason for a different Organizational (OL)
finding in our study might be that imparting relevant knowledge and
skills to the employees, collaboration among the supply chain entities, Support of top management (OL1)
and results of teamwork may not be evident immediately. As the firms Transformational leadership style (OL2)
are still in the early stage of I4.0, the effect of human factor, though Organizational culture which is open to change (OL3)
positive is not statistically significant. We believe that in future, as or­ Awareness about benefits of Industry 4.0 technologies (OL4)
ganizations become more familiar with I4.0, the role of human would be Proactive behavior in the adoption of Industry 4.0 technologies
much more evident. Thus, managers need to focus initially on organi­ (OL5)
zational and technological factors, and then focus on human factors to
realize the true potential of I4.0, when competing in a dynamic Human (HUM)
environment.
Finally, our study empirically validates the effect of I4.0 on market Impart relevant training and skills to the employees (HUM1)
and environmental performance. Most of the earlier studies have Communication with employees regarding Industry 4.0 (HUM2)
mentioned about the positive effect of I4.0 on sustainability, and market Teamwork for achieving desired objectives (HUM3)
performance. However, except Li et al. (2020), the other studies are Proper collaboration among the supply chain entities (HUM4)
based only on qualitative reasoning or conceptual discussion. Li et al.
(2020) examined the effect of I4.0 technologies on economic and envi­ Technological (TL)
ronmental performance in manufacturing firms in China. We would like
to submit that to reach a conclusive agreement about the effect of I4.0 on Compatibility of Industry 4.0 technologies with current practices and
performance outcomes, more empirical studies are required as this area existing infrastructure (TL1)
is still emerging, and there is lack of studies which go beyond conceptual Adoption of innovation in the processes (TL2)
discussion. Further, few studies have also reported that digital tech­ Communication technologies such as teleconferencing, web meeting,
nologies negatively affect environmental and financial performance intranet to assist in Industry 4.0 (TL3)
(Kiel et al., 2017), and product performance (Dalenogare et al., 2018). Design integration between product development and
The findings of our study further validate the effect of I4.0 technologies manufacturing through platform design, standardization and modula­
on performance outcomes. The findings can be useful for managers in rization, etc (TL4)
understanding the benefits of I4.0, how I4.0 can contribute towards
sustainable development, and improve market performance. In the Industry 4.0 (I4.0)
initial stages of I4.0 implementation, firms will have to make in­
vestments, but in the long term, they can reap the benefits in terms of Internet of Things (I4.0_1)
improved environmental as well as market performance. Cloud Computing (I4.0_2)
Big Data analytics (I4.0_3)
6. Conclusions Additive manufacturing (AM) (I4.0_4)

This study examines whether ED drives firms towards the adoption of Market performance (MARKP)
I4.0 technologies, and consequently commensurate performance out­
comes (environmental and market). The study applies HOT framework, Growth in return on sales (MARKP1)
and also examines the mediation of critical factors (Human, Growth in sales (MARKP2)

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S. Kumar and M.S. Bhatia Industrial Marketing Management 95 (2021) 54–64

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