Industry 4.0 Adoption by Indian MSMEs and its Effects on Competitive Advantage and Firm Performance: An Empirical Analysis

Abstract

Purpose: This study examines the factors influencing the adoption of Industry 4.0 technologies by Indian Micro, Small, and Medium Enterprises (MSMEs) and investigates the subsequent impact on competitive advantage and firm performance.

Design/Methodology/Approach: The present study applies the Unified Theory of Acceptance and Use of Technology 2 (UTAUT2) framework to understand the determinants of Industry 4.0 adoption. A survey was conducted among MSMEs engaged in manufacturing, resulting in 372 valid responses. Partial Least Squares Structural Equation Modeling (PLS-SEM) was used to analyze the data.

Findings: The analysis revealed that performance expectancy, effort expectancy, social influence, facilitating conditions, hedonic motivation, price value, and trust significantly influence the intention to adopt Industry 4.0 tools. The intention to adopt these tools significantly impacts competitive advantage, which in turn positively affects firm performance. The study confirms the mediation effect of competitive advantage on the relationship between adoption intentions and firm performance.

Research Limitations/Implications: The study is limited to MSMEs in the manufacturing sector in India and may not be generalizable to other sectors or regions. Future research could explore longitudinal impacts and sector-specific challenges.

Practical Implications: The findings suggest that enhancing facilitating conditions, addressing financial constraints, and building trust in Industry 4.0 technologies can foster adoption among MSMEs. Policymakers and industry stakeholders should focus on providing technical support, training, and financial incentives to encourage digital transformation.

Originality/Value: This study provides empirical evidence on the adoption of Industry 4.0 tools by Indian MSMEs, highlighting the critical factors that drive adoption and their impact on competitive advantage and firm performance. It contributes to the understanding of digital transformation in the India MSME sector and offers practical insights for stakeholders.