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A resource-based view on SMEs regarding the transition to more sophisticated

stages of Industry 4.0

Article in European Management Journal · October 2021

DOI: 10.1016/[Link].2021.10.001

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A resource-based view on SMEs regarding the transition to more sophisticated stages

of Industry 4.0

Miren Estensoro, Miren Larrea, Julian M. Müller, Eduardo Sisti

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To appear in: European Management Journal

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Revised Date: 16 September 2021
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Please cite this article as: Estensoro M., Larrea M., Müller J.M. & Sisti E., A resource-based view on
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A resource-based view on SMEs regarding the transition to more sophisti-
cated stages of Industry 4.0

Miren Estensoroa*, Miren Larreaa, Julian M. Müllerb* and Eduardo Sistia

a Orkestra-Basque Institute of Competitiveness, University of Deusto, Mundaiz, 50, 20012

San Sebastián, Spain

* Email address: mestenso@[Link]

ORCID: [Link]

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b Kufstein University of Applied Sciences, Andreas-Hofer-Str. 7, 6330 Kufstein, Austria &

r
Friedrich-Alexander-University Erlangen-Nürnberg, Lange Gasse 20, Germany

** Email address: [Link]@[Link]

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 1

A resource-based view on SMEs regarding the transition to more

sophisticated stages of Industry 4.0

Abstract

The integration of small and medium-sized enterprises (SMEs) within the concept Industry 4.0

represents one of its main challenges, as they play a vital part in industrial value chains that shall

be digitized from suppliers to the end customer. However, what the implementation stages for

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Industry 4.0 in SMEs should be as well as the respective resources for achieving the next stage

are scarcely understood. In response, this paper proposes a framework using a resource-based

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review for Industry 4.0 implementation according to the stage of development in SMEs, created
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between researchers, policy makers, and 354 manufacturing SMEs in the province of Gipuzkoa

(Basque Country, Spain). The paper applies a mixed-method approach, combining qualitative
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(interviews) and quantitative elements (survey data). The results are used to develop a model with
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four stages of SMEs that are characterized by having distinct preconditions and conditions for

Industry 4.0. Thereupon, the required measures to achieve the next stage of Industry 4.0
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implementation are derived. This highlights Industry 4.0 for SMEs as a process with different
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stages toward achieving sustainable competitive advantage and offering insight into how the

different resources operate. The high importance and advanced position regarding industrial value

creation and SMEs in Gipuzkoa allows to generalize and transfer the findings to other European

regions.

Keywords: Industry 4.0; implementation; SMEs; manufacturing industry; resource-based view

 2

1. Introduction

While there is a general agreement that small and medium-sized enterprises (SMEs) face

difficulties in implementing Industry 4.0, exactly which resources are required by SMEs in

different implementation stages remains scarcely understood in extant literature (e.g., Moeuf et

al., 2018, 2020; Mittal et al., 2018; 2019; Müller et al., 2021). SMEs, defined throughout the

European Union as enterprises with a maximum turnover of 50 million € and with up to 250

employees, are of enormous importance for both the European and Basque economies (Eurostat,

2018; Eustat, 2018). This paper focuses on the case of one of the provinces of the Basque Country

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(Spain), Gipuzkoa, a highly industrialized territory within Europe where SMEs play a large role.

Due to its high industrial share, innovation leadership and structural characteristics, a report for

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the European Commission states the Basque Country as having high structural similarity with
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leading European industrials regions such as Baden-Württemberg in Germany or Lombardia and

Piemonte in Italy. This makes the results comparable and generalizable to such regions (Navarro
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et al., 2014). Further, in Gipuzkoa, one of the three provinces of the Basque country regarded in
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this study, the industrial share in value added (27.8%) is even higher than in the Basque country

(23.9%) and significantly higher than in Spain (16.1%) or the EU 27 countries (19.7%) (Eurostat,
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2018; Eustat, 2018; Navarro and Vázquez, 2021).

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The great importance of industrial SMEs means that beyond economic rationales, the successful

integration of SMEs into Industry 4.0 is also a relevant social challenge and thus, specific policies

and programs should be designed accordingly (Müller and Voigt, 2018). The problem statement

that guides this paper is that, unless more attention is paid in the literature to integrating and

supporting SMEs within Industry 4.0, many of these enterprises might be left out of this new

paradigm (Bär et al., 2018; Müller et al., 2018). While it is true that general challenges of Industry

4.0 in SMEs are comparably better understood (e.g., Moeuf et al., 2018; 2020), the

implementation stages of Industry 4.0 for SMEs and which resources are required to achieve the

next stage has scarcely been investigated to date (Arcidiacono et al., 2019; Ghobakhloo, 2018;

Mittal et al., 2018, 2019). In response, this paper takes a resource-based view (RBV) to address
 3

this research gap, aiming to contribute to a better understanding of the implementation stages and

the respective resources acting as conditions in each stage by answering the following research

question:

What are the required resources that explain the transition between the stages of Industry 4.0

development in manufacturing SMEs?

Based on taking an RBV, the paper’s contribution is a framework for building an inclusive

Industry 4.0, integrating company representatives, policy makers and researchers to help SMEs

in Gipuzkoa. This framework considers the inclusion of SMEs in Industry 4.0 as a progressive,

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potentially multi-step process toward more sophisticated applications of Industry 4.0. For this

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reason, it defines a series of stages and the resources that are determinant in each stage. By
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developing the resources acting as conditions in each stage, SMEs generate the resources needed
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to evolve into the next stage. The framework presented is inclusive because it assumes that the
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process has already started with the use of less sophisticated technologies, e.g., enterprise resource

planning (ERP), which certain frameworks do not consider as part of Industry 4.0, but are actually
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not even state of the art in some manufacturing SMEs today. In this way, even SMEs with less
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sophisticated technologies can anchor into this process and evolve. Further, the paper shows how
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the analytical framework has been used to study and support 354 SMEs in Gipuzkoa.

The remainder of this manuscript is organized as follows: section 2 presents the theoretical

background. Sections 3 and 4 describe the method and results of the empirical research into 354

SMEs in Gipuzkoa. The results are discussed in section 5 and the conclusions are presented in

section 6, along with theoretical and managerial implications and suggestions for future research.

2. Theoretical background

2.1 Industry 4.0

The term Industry 4.0 refers to the concept of a fourth industrial revolution. It was originated in

the German government’s strategy for reinforcing the competitiveness of its manufacturing
 4

industry and first appeared in 2011, when it was introduced at the Hanover Fair (Kagermann et

al., 2013; Lasi et al., 2014). In this paper, we define Industry 4.0 following the initial concept of

the German government as published by Kagermann et al. (2013): The main technological

foundation of Industry 4.0 is the integration of cyber-physical systems (CPS) based on the concept

of the Internet of Things (IoT) into manufacturing. It aims to develop intelligent, self-regulating,

and interconnected industrial value creation. CPS allow data to be collected by products,

production facilities and customers across the entire value chain, which is made possible thanks

to the interconnection via the IoT (Kagermann et al., 2013; Lasi et al., 2014). It is these properties

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of CPS and the IoT that enable the central characteristics of Industry 4.0: horizontal and vertical

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integration, i.e., digitally enabled integration of company functions, and digitally enabled

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integration across the value chain, from the customer to the other end of the value chain, which
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are often represented by SMEs (Kagermann et al., 2013; Lasi et al., 2014; Ghobakhloo, 2018;
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Müller et al., 2018).
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These technological foundations allow for more efficient, flexible, and resilient industrial value
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creation, improving operational effectiveness and, therefore, the competitiveness of industry

(Kagermann et al., 2013; Lasi et al., 2014): Besides these operational benefits, strategic potentials
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are also expected, such as entirely digitized, connected, smart, and decentralized value chains that
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contribute to ecological and social targets. Moreover, it opens the door for providing new services

and developing other business models. These are based on data-driven value propositions through

data availability across the value chain and data analytics (Frank et al., 2019; Kagermann et al.,

2013; Müller et al., 2018; 2021).

However, to enable the full potential of Industry 4.0, data availability and data exchange across

the supply chain, as well as further technological enablers must first be achieved. There are several

barriers of different origin when it comes to implementing Industry 4.0 and they are especially

crucial for SMEs (Müller et al., 2021; Raj et al., 2020), as described in the next section. In general,

SMEs must be integrated within the concept of Industry 4.0, given the role they play in industrial

value creation (Müller et al., 2018; Moeuf et al., 2018; 2020).

 5

2.2 Industry 4.0 in SMEs

There is extant research on Industry 4.0 stressing the fact that it is often harder for SMEs to attain

the potential benefits of Industry 4.0 than it is for large enterprises (Horváth and Szabó, 2019;

Müller et al., 2018). In contrast to their larger counterparts, SMEs often do not recognize or even

attempt to understand the strategic benefits that could be achieved if they implemented Industry

4.0. This is due to limited resources that often and lacking strategy toward Industry 4.0 (Horváth

and Szabó, 2019; Masood and Sonntag, 2020; Moeuf et al., 2018; 2020; Sahi et al., 2020; Stentoft

et al., 2020). Other insufficient resources include niche-oriented business models and innovation

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management approaches that are often much more focused on operational adjustments rather than

considering new forms of value creation (Müller et al., 2018; 2021; Somohano-Rodríguez et al.,

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2020). Additionally, little or no automation in value creation processes as well as non-
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standardized processes in SMEs are found to hamper the implementation of Industry 4.0 (Müller

et al., 2018; Stentoft et al., 2020).

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Furthermore, the transition toward Industry 4.0 requires a greater change in terms of removing
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functional silos, change management, supportive culture, supply chain integration, and data
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transparency across the entire value chain. All these factors prove to be especially challenging for
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SMEs due to extant logics regarding value creation and their extant business models

(Ghobakhloo, 2018; Moeuf et al., 2018, 2020; Müller et al., 2018, 2020). This leads to fear toward

change and job losses, which needs adequate change management processes and culture that are

often missing in SMEs (Cimini et al., 2020; Khanzode et al., 2020; Raj et al., 2020). Likewise,

the low level of standardization and digitalization, and smaller production series combined with

less automated production equipment or limited access to financial resources and knowledge can

hamper Industry 4.0 implementation in SMEs (Horváth and Szabó, 2019; Müller et al., 2018). A

detailed overview of the respective resources, divided into preconditions and conditions of

Industry 4.0, is developed in section 3.1.

 6

Policy makers and industry associations are concerned that SMEs are being left behind in Industry

4.0 implementation, and there are no clear frameworks or guidelines to support them in

implementing Industry 4.0 relating to the respective resources (Khanzode et al., 2020; Mittal et

al., 2018, 2019). Indeed, the development of Industry 4.0 can be brought to a standstill if SMEs,

which are the bulk of the European production industry, are not included in it (Müller et al., 2018;

Moeuf et al., 2018). Furthermore, most industrial value chains are largely dependent on SMEs as

suppliers, which means that they need to be included in horizontal and vertical integration,

representing key pillars of Industry 4.0 (Bär et al., 2018; Müller et al., 2021).

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2.3 Resource-based view and research gap

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According to RBV, organizations can improve their competitive position, e.g., with regard to
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costs, quality, or further factors for differentiation, if they possess and exploit resources and
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capabilities that are valuable, rare, inimitable, and non-substitutable (Barney, 2001; Newbert,
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2008). The RBV aims to understand the relationships between different resources and how

resources can be combined to maintain competitive advantage (Barney, 2001; Peteraf, 1993).
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Therefore, this paper regards RBV as a suitable theoretical perspective to investigate the
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implementation levels of Industry 4.0 in SMEs and how different resources interplay to achieve
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the next level.

Research on Industry 4.0 has identified the lack of experience in SMEs, especially in terms of a

limited number of roadmaps, maturity models, frameworks and readiness assessments which

reflect the specific resources of SMEs (Mittal et al., 2018; Müller et al., 2021), targeted aspects

for Industry 4.0 implementation, and implementation patterns (Frank et al., 2019). In contrast to

extant publications, this paper goes beyond developing a framework of conditions in SMEs

regarding Industry 4.0. It further includes RBV as a theoretical perspective and presents the results

of a process that has lasted for more than two years, in which policy makers, development

agencies, and SMEs themselves have been part of an implementation approach.

In doing so, this paper contributes to fill the following research gaps in extant literature:
 7

1) Include an RBV within an implementation model of Industry 4.0, as Industry 4.0 in general

has scarcely been analyzed from the perspective of RBV so far (e.g., Salam, 2019).

2) Improve the way SMEs’ requirements are integrated into policy for Industry 4.0 by

developing a model of implementation stages toward Industry 4.0 that begin before extant

maturity models, representing the development stage of many SMEs that are currently left

out of the process (e.g., Mittal et al., 2018; Müller et al., 2018).

3) Develop a long-term perspective with development stages for Industry 4.0 in SMEs in

contrast to observations that can only report from a single point of time (e.g., Frank et al.,

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2019; Müller et al., 2018).

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In sum, the paper aims to show how specific resources are combined in different development

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stages of SMEs toward Industry 4.0, i.e., how different resources relevant for Industry 4.0
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implementation lead to sustainable competitive advantage through Industry 4.0 implementation.

It further connects the RBV with a long-term implementation plan comprised of different stages,
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highlighting the requirement to combine resources by a firm strategy and adequate leadership
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(Bhandari et al., 2020).

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3. Methodology

Given that the topic of Industry 4.0 implementation in SMEs represents a novel and emerging

phenomenon that shall be explored in its real-life environment, a case study approach was chosen

(Yin, 2017). The case, the region of Gipuzkoa within the Basque Country in Spain, is explained

in section 3.1. The case study is built upon a two-stage process: The first stage is a series of

workshops where researchers, policy makers, and development agencies discuss and condense

the experiences and challenges of SMEs with regard to Industry 4.0. This process is described in

section 3.2. Thereupon, the research methods of the second stage are defined in order to test,

quantify and deepen the results of the first stage. The second stage consists of a mixed-method

approach described in section 3.3, combining qualitative (section 3.4), and quantitative research

(section 3.5) (Bryman, 2006; Venkatesh et al., 2016).

 8

3.1 Case description

The Basque Country is one of the most industrialized regions in Europe. The industry sectors of

automotive, basic metals and metal products, machinery and equipment, and electrical and

electronic equipment, representing the majority of firms regarded in this study, constantly account

for about 50% of jobs. This is about twice than it is in the rest of Spain. Further, SMEs constantly

contributed almost 70% to the gross domestic product (GDP) in the Basque Country over recent

years. In Spain, this number is around 60%, while in the EU, SMEs contributed around 50% of

the GDP over the last years (Eustat, 2018; Navarro et al., 2014; Navarro and Vázquez, 2021).

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According to a structural analysis for the European Commission, the Basque Country is

comparable and results are transferable to leading industrial regions in Europe. In Spain, it is the

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only strong innovator region besides the greater Madrid region (European Innovation Scoreboard,
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2021). Examples for structurally comparable regions are Baden-Württemberg in Germany or

Piemonte and Lombardia in Italy (Navarro et al., 2014). Those are regions well-known for their
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industrial strength and innovativeness, headquartering firms like Bosch, Daimler, or Fiat. Further
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comparable regions in Europe include Lower Austria with several automotive industry clusters

or Wales with, e.g., automotive and aerospace industry clusters (Navarro et al., 2014). Based on
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this structural analysis by the European Commission, we claim that the findings are generalizable
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and transferrable to other leading industrial regions throughout Europe.

Moreover, the Basque Country has been considered an interesting example for the analysis of

industrial policy (Navarro and Sabalza, 2016). Even in periods when these types of policies were

unpopular in comparison with develop service industries, the regional government has made an

intensive effort to sustain strong industrial policy since it was established in 1980 (Magro et al.,

2020; Morgan, 2016). The provincial councils and county development agencies are, together

with the Basque Government, part of the public administration institutions that support such

industrial policy. Because SMEs are the bulk of this industrial activity, they have been explicitly

considered in the policies by the regional government. Indeed, the integration of Industry 4.0 in

SMEs is one of the main challenges for industrial transition in this region, as it represents a general
 9

challenge of Industry 4.0 (Moeuf et al., 2018, 2020; Müller et al., 2018). These features make the

case suitable to answer the research question and generate knowledge about Industry 4.0 in SMEs

which is more nuanced than extant knowledge. This is as this paper presents the results of a

process that was developed between policy makers, development agencies and SMEs over more

than two years.

Gipuzkoa, one of the three regions within the Basque Country, has an even higher industrial share

in value added (27.8%). This industrial share is higher than in the Basque country (23.9%) and

significantly higher than in Spain (16.1%) and the EU 27 countries (19.7%) (Eurostat, 2018;

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Eustat, 2018; Navarro and Vázquez, 2021). In Gipuzkoa, the subgroup of manufacturing SMEs

with between 20 and 99 employees alone represents 23.7% of all manufacturing firms.

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Investigating SMEs with between 20 and 99 employees means that very small firms that often
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struggle with Industry 4.0 due to lacking process standardization as a result of workshop

environments are left out of the analysis. In addition, given that larger SMEs often do not share
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the typical characteristics of small firms with regard to Industry 4.0, the entire research design
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can therefore be more defined (Müller et al., 2018).

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3.2 Questionnaire development

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In this case study, focus groups with policy makers of the Provincial Council of Gipuzkoa and

county development agencies of this territory made it possible to define the methodology used

for interviewing the firms. These focus groups were moderated by the authors of this paper, which

were the main point of contact with the 354 SMEs that participated in the research process. The

shared goal was to analyze the situation of SMEs regarding Industry 4.0 in order to inform policy

programs on how to help them onto the Industry 4.0 path. The long-term relationship between

these agencies and SMEs explains the high response rate of 70% referred to in section 3.2.

The meaning of Industry 4.0, the list of 4.0 technologies considered, the analytical framework

described in section 4 and corresponding interview guidelines and questionnaires were co-defined

through participation in focus groups. At these workshops, researchers contributed their academic
 10

knowledge on Industry 4.0 and on the ongoing analysis, policy makers from the Provincial

Council contributed their knowledge on the policy process, and the county development agency

staff contributed their knowledge on the situation of SMEs. Table 1 summarizes the dates,

participants, issues addressed, and results and further actions in each of these focus group

workshops.

Table 1. Focus group workshops

Date of the Participants Issues addressed Results and further actions

workshop
May 12, 4 researchers.  Objectives of the process for (Researchers) Drawing up of
2017 3 policy makers from the supporting SMEs in Industry 4.0. the interview guidelines.

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Provincial Council.  Meaning of Industry 4.0. (Agencies) Identification of

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17 policy makers from  Preconditions and conditions for the the challenges that agencies
county development transition to Industry 4.0. will face when conducting
agencies.  Role of agencies within the the interviews.

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innovation system when supporting
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SMEs in Industry 4.0.
 Methodology for interviewing
SMEs; group discussion to make
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contributions.
 Presentation by agencies of projects
and experiences on 4.0 and SMEs.
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June 6, 5 researchers.  Defining Industry 4.0 in the project. (Researchers) Drawing up of

2017 3 policy makers from the  List of 4.0 technologies. a new version of the
Provincial Council.  Meaning of servitization. interview guidelines.
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13 policy makers from  Examples of servitization processes (Researchers) Definition of

county development in SMEs. the role of agencies within
agencies.  Identifying other agents in the the innovation system when
innovation system for supporting supporting SMEs in Industry
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Industry 4.0 transition on SMEs. 4.0.

September 4 researchers.  Definitive interview guidelines (Researchers) Drawing up of
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9, 2017 5 policy makers from the (including issues addressed in the a new version of the
Provincial Council. previous workshop). interview guidelines.
13 policy makers from  Database to gather the information (Agencies) Pilot testing of
county development collected in the interviews. the methodology used for
agencies.  Presentation by policy makers of interviewing 28 SMEs.
2 policy makers from the public programs (Provincial (Researchers) Analysis of
Basque regional Council and Basque Government) information gathered in the
Government. supporting Industry 4.0 in SMEs. database.
November 4 researchers.  Results of pilot interviews in 28 (Researchers) Publication of
2, 2017 4 policy makers from the SMEs: discussion on changes in the the definitive interview
Provincial Council. guidelines, questionnaires and the guidelines and database.
13 policy makers from database. Agencies) Visits and
county development  Presentations by Tknika and interviews with SMEs.
agencies. Innobasque, complementary to (Researchers) Analysis of
2 policy makers from the county development agencies in information gathered in the
Basque Innovation Agency supporting Industry 4.0 in SMEs. database.
(Innobasque).
2 policy makers from the
Basque Vocational
Education and Training
Innovation Agency
(Tknika).
February 3 researchers.  Challenges, beyond the (Agencies) Visits and
15, 2018 3 policy makers from the methodological approach, for interviews with SMEs.
Provincial Council. supporting SMEs’ transition to
Industry 4.0.
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12 policy makers from  Presentation by GAIA, (Researchers) Analysis of

county development complementary to county information gathered in the
agencies. development agencies in supporting database.
2 GAIA associates (ICT Industry 4.0 in SMEs.
Cluster Association).
May 3, 5 researchers.  Preliminary analysis by researchers (Agencies) Visits and
2018 3 policy makers from the of the results from the information interviews with SMEs.
Provincial Council. gathered in the database. Agreement (Researchers) Analysis of
13 policy makers from on the objectives of future policy information gathered in the
county development programs to support SMEs’ database,
agencies. transition to Industry 4.0. (Provincial Council) Design
of the new policy program.
June 28, 4 researchers.  Analysis of results by researchers.
2018 5 policy makers from the  Agreement on the objectives,
Provincial Council. principles and conditions of a new
13 policy makers from policy program.
county development  Agreement on the objectives of a
agencies. new research project on Industry 4.0
and SMEs.

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During the workshops, the contents of these meetings and subsequent discussions were

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transcribed by several researchers individually. After the workshops, the results of the dialogue
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among participants were condensed and systematized using a qualitative content analysis with an

inductive research approach. Any deviations between the different researchers that made the
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transcriptions of the workshops were discussed until agreement was reached (Bryman, 2006;
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Gioia et al., 2013). Subsequently, the results of this process were shared with participants and

conferred in the next workshops until their consent was given. Further, the results were compared
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with extant literature and possible missing aspects were discussed with workshop participants
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about whether those should also be included. Qualitative content analysis was also applied to

examine the interviews described in section 3.2.

As a result of this process, two types of resources for the implementation of Industry 4.0 were

identified. The first category of resources, which is based on the previously quoted studies, was

directly defined together with the experts in Industry 4.0 and was named conditions for Industry

4.0. These conditions would help analyze the situation of firms which have favorable settings for

implementing Industry 4.0 straightaway. The second type of resources was aimed at firms in an

earlier stage of their development and was named preconditions. These preconditions refer to the

basic requirements needed for firm competitiveness, mainly related to the modernization of firms
 12

in organizational, product, and process issues. The decision to also work on preconditions makes

Industry 4.0 accessible to more firms and is an inclusive feature of the methodology presented.

When considering the technologies to be addressed within Industry 4.0, inclusiveness was

complemented in the definition of resources. The list of technologies was also inspired by the

literature and developed between policy makers and researchers. It was decided that, although

some very basic technologies are not considered by the literature as belonging to Industry 4.0,

they would be included here so that a larger number of firms could see Industry 4.0 as an attainable

objective. That is, many SMEs are still far from needing high-tech approaches straightaway, but

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rather require a long-term, stepwise implementation plan (Mittal et al., 2018, 2019; Moeuf et al.,

2018, 2020; Müller et al., 2018). The rationale behind this decision was that there might be firms

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which, by integrating less sophisticated technologies, could improve their preconditions and
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conditions, and therefore could be considered as candidates to adopt technologies they might not

have been able to implement before. This was the reason why technologies, such as ERP, was
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included in the program’s list of technologies, which was defined and divided into two groups:
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The first group is comprised of technologies that are typical in large enterprises today, but which

represent a prerequisite for Industry 4.0 that often has not yet been achieved by many SMEs
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(Müller et al., 2018): ERP systems and computerized numerical control (CNC) for processes and
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production equipment. The second group includes technologies that are at the core of Industry 4.0

when applied in horizontal and vertical integration (Kagermann et al., 2013): IoT, Integration of

Sensors and Advanced Metrology, Cloud Computing, Data Analytics and Big Data Analysis,

Cybersecurity, Modelling and Simulation, as well as Additive Manufacturing. These technologies

mentioned represent the majority of technologies regarded in extant maturity models in

managerial practice toward Industry 4.0 (Mittal et al., 2018; Wagire et al., 2020). The conditions

and preconditions for Industry 4.0, which were defined as resources in the analytical framework

are synthetized in Table 2.

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Table 2. Resources as preconditions and conditions of Industry 4.0 in SMEs

Resource Description Exemplary references

Helps SMEs to understand the effects or the potential of Arcidiacono et al., 2019;
Products Industry 4.0 in the case of being a process developer or having Horváth and Szabó,
their own product. 2019
Assesses SMEs’ resources, capabilities, and focus on Müller et al., 2018, 2021
Innovation
innovation (product, process, organizational or commercial).
Evaluates the firm’s level of internationalization by analyzing Horváth and Szabó,
Internationalization its export turnover and capability to establish foreign trade 2019; Mittal et al., 2018,
networks and to develop an internationalization plan. 2019
Preconditions for Industry 4.0

Assesses the existence of cooperation within the value chain Müller et al., 2018, 2021
Alliances
or with other actors of the territorial innovation system.
Determines whether the SME has an employee development Birkel et al., 2019; Matt
Skills Plan
plan for improving the skills and competencies of staff et al., 2018
Evaluates whether the management model is consistent with Matt et al., 2018

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Skills Management the skills development plan and makes the most of staff

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capacities through participation in decision making
Determines if the firm has designed a strategy for the future as Horváth and Szabó,
Strategy well as a strategic plan through which it expects to make its 2019; Sahi et al., 2020

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transition.

Leadership
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Examines whether the SME has shifted to a leadership model
in which managers take decisions and risks, anticipate
problems, and encourage staff to participate.
Birkel et al., 2019;
Moeuf et al., 2018, 2020
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Assesses the viability of the strategic plan in terms of Moeuf et al., 2018,
Finances allocating resources and financial management capabilities. 2020; Müller et al.,
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2018, 2021
Determines to what extent the sector the SME operates in is Müller et al., 2018,
Market one where there is pressure or possibilities to advance in the 2021; Moeuf et al.,
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transition to Industry 4.0. 2018, 2020

Identifies where the SME is positioned in the value chain and Bär et al., 2018; Birkel et
Competitors how its relationship with other (often bigger and client, but al., 2019
also competitor) firms in the chain can affect Industry 4.0.
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Addresses to what extent manufacturing and service provision Frank et al., 2019;
Servitization are connected, and opportunities are envisaged in terms of Müller et al., 2018, 2021
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servitization and service-based business models.

Conditions for Industry 4.0

Evaluates the profitability of potential investments of the SME Birkel et al., 2019;
Efficiency
in Industry 4.0. Moeuf et al., 2018, 2020
Explores whether the “Industry 4.0 plan” is aligned with the Moeuf et al., 2018,
Strategy strategic thinking of the firm, which requires top management 2020; Sahi et al., 2020
involvement and a holistic approach.
Assesses the qualification level of staff or the possibility of Matt et al., 2018; Moeuf
Qualified staff furthering qualifications to face Industry 4.0-related et al., 2018, 2020
challenges.
Evaluates the potential of the SME to allocate resources to Müller et al., 2018, 2021
Investments
Industry 4.0-related investments.
Determines the extent to which the SME is developing Bär et al., 2018; Müller
Industry 4.0-oriented cooperation with other SMEs, in the et al., 2018, 2021
Alliances
value chain with customers and suppliers or through alliances
with actors from the innovation system.
Examines whether the managerial and organizational models Moeuf et al., 2018,
Organization
are adapted to the requirements of Industry 4.0. 2020; Sahi et al., 2020
Assesses the availability of high-speed network in the area Birkel et al., 2019;
Infrastructure
where the firm is located. Mittal et al., 2018; 2019
 14

In order to comply with the characteristics of resources within the RBV, valuable, rare, inimitable,

and non-substitutable (Barney, 2001), the workshops between policy makers, country

development agencies, SMEs, and further stakeholders were designed to ensure that the resources

defined fulfilled the above-named criteria. Further, as in addition to the original four

characteristics of resources, Barney and Hesterly (2010) extended added a fifth characteristic,

organized resources, we ensured this criteria as well as reflecting its importance in the existence

of an Industry 4.0 implementation plan, as described in section 4. All criteria for resources were

further ensured in the conducted follow-up interviews and workshops after the qualitative and

f
quantitative investigations. In conjunction, we argue that the combination of the valuable, rare,

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inimitable, and non-substitutable resources that are organized leads to a sustainable competitive

r
advantage through the implementation of Industry 4.0.
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3.3 Empirical approach
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Based on the results of the workshops described in the previous section, an empirical, interview

and survey-based research was conducted. Through this mixed-method approach, the benefits of
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qualitative and quantitative research could be combined, thus reducing the bias of both methods
ur

(Bryman, 2006). While the qualitative approach serves to derive constructs and requirements of
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SMEs for certain development stages toward SMEs, the quantitative approach shows

relationships between the identified constructs, especially separating those between different

development stages.

The mixed-method approach consists of a sequential research design, consisting of two steps

(Venkatesh et al., 2016). The first step started with a qualitative investigation where in-depth

expert interviews were conducted. These interviews served to a) classify the respective SME into

groups so as to distribute the appropriate questionnaire in the quantitative investigation and b)

gain greater insights and expert opinions from SMEs in the respective groups. Relating to the

research question “What are the required resources that explain the transition between the stages

of Industry 4.0 development in manufacturing SMEs?”, different groups of SMEs in distinct stages
 15

of Industry 4.0 implementation are derived in an initial, qualitative approach that further serves

to gain expert opinions and explore other topics that have not been considered in the literature or

in the initial workshops. Subsequently, the characteristics and distinct configuration of resources

between the stages are defined and quantified in a second, quantitative stage (Creswell, 2003;

Tashakkori and Teddlie, 2010).

Depending on their answers, a specific quantitative survey was given to the respective respondent

in the second step, which is shown in the Appendix. These surveys serve to quantify the resources

as preconditions and conditions presented in Table 2, and also to differentiate between the five

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groups of SMEs defined in the following.

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3.4 Qualitative investigation and definition of SME categories
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In the first step, 506 SMEs with between 20 and 99 employees were contacted, the response rate
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being 70%. Thus, the final sample size consisted of 354 SMEs. The list of firms came from the
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Basque Directory of Economic Activities managed by Eustat (Basque Institute of Statistics). All
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firms are established SMEs, not Start-Ups and are SMEs that are not part of larger firms or family

holdings, therefore having a comparable governance structure.

ur

The basic descriptive statistics by size and industrial sector are presented in Table 3, the largest
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group is basic metals and metal products (42% of the sample), while 18% of the sample are

machinery and equipment firms. In terms of firm size measured by the number of employees,

70% of the sample consists of firms with between 20 and 49 employees.

Table 3. Descriptive statistics of the sample

Industry sector 20–49 50–99 Total %

Basic metals and metal products 112 37 149 42
Machinery and equipment 41 21 62 18
Wood and wood processing 31 14 45 13
Chemistry, Rubber and plastic 20 15 35 9
Electrical and electronic equipment 16 4 20 5
Parts for consumer goods industry 13 6 19 5
Automotive parts 10 4 14 4
Further or not unequivocal 5 4 9 3
Total 249 105 354 100%
 16

The interviews took place from December 2017 to May 2018 and lasted between approximately

90 and 120 minutes. Because SMEs often have a single business model (Müller et al., 2018),

which is best known by the general manager, in most of the cases the person who was interviewed

was the CEO.

The interviews were analyzed using a qualitative content analysis, forming codes from empirical

material that was audio-recorded and transcribed (Gioia et al, 2013). To ensure coding validity

across several coders, as each interview was coded by two coders, intercoder reliability was

calculated following Holsti (1969). A value of above 0.9 between all coders indicates high

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intercoder reliability.

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The interviews were divided into three parts, which are described as follows. The first part focused
-p
on introducing both the agency staff and the respondents, and on presenting the objectives of the
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initiative. The second part started by sharing the inclusive interpretation of Industry 4.0 defined
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in the project and by asking interviewees about their level of Industry 4.0 implementation and if

they had an Industry 4.0 implementation plan. Depending on their answers, agency staff chose
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the most appropriate survey or questionnaire for the firm (see Table 4). Therefore, the data
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collection process reflected which stage of Industry 4.0 implementation the firms were in. SMEs
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are classified according to two dichotomous indicators: Their current involvement in Industry 4.0

and the existence of an Industry 4.0 implementation plan. The involvement in Industry 4.0 is

defined as that among the list of advanced Industry 4.0 technologies defined (IoT, Integration of

Sensors and Advanced Metrology, Cloud Computing, Data Analytics and Big Data Analysis,

Cybersecurity, Modelling and Simulation, and Additive Manufacturing), at least three are already

used or in pilot applications. The existence of an Industry 4.0 implementation plan was defined

as that there is a formalized plan with milestones for budget, personnel, and processes to

implement more Industry 4.0 or existing technologies in significantly more operations. Both

indicators were evaluated by territorial development agency that is in close contact with the

manufacturing SMEs investigated.

 17

Those SMEs which are not involved in Industry 4.0 and do not have an Industry 4.0 plan are

classified according to two subgroups: those which have Industry 4.0 the required resources as a

precondition and those which do not. This information was considered crucial for defining the

specific policy initiatives for these two groups and to determine whether they were ready to start

working on the development of conditions or whether they needed specific programs to develop

resources toward preconditions. It is for this reason that the four types corresponding to the two

dichotomous indicators were developed into five categories. Table 4 shows the description of

each category of SMEs, the criteria for inclusion in each category and its respective data collection

f
method. As described in Table 4, the SMEs that stated they were already involved in the

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implementation of Industry 4.0 and had an Industry 4.0 plan did not answer any survey or

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questionnaire as it was assumed that they fulfilled resources for both, preconditions and
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conditions. For this SME category, only qualitative information was obtained. Table 5 highlights
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the inclusion criteria for each stage.
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Table 4. Data collection process in each category of SMEs

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Category Description of the category Data collection method

Full implementers Firms involved in Industry 4.0 Qualitative table filled with the information obtained.
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(88) implementation including an

Industry 4.0 plan.
Non-planner Firms involved in Industry 4.0 - Quantitative survey asking for 10 Industry 4.0
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implementers (106) implementation but without a plan conditions, using a 4-point Likert scale.
that formalizes it. - Qualitative: asking an open-ended question for each
condition.
Non-implementer This group of firms has an - Quantitative survey asking for 10 Industry 4.0
planners (4) Industry 4.0 plan, although they conditions, using a 4-point Likert scale.
are not yet involved in its - Qualitative: asking an open-ended question for each
implementation. condition.
Non-implementers of This group of firms fulfills many - Quantitative survey asking for 10 conditions and 9
Industry 4.0 with of the preconditions (they score in preconditions for Industry 4.0 using a 4-point Likert
preconditions (68) the two highest levels of the scale.
Likert scale) of Industry 4.0 - Qualitative: asking an open-ended question for each
transition, although they are not condition and precondition.
yet involved in its
implementation.
Non-implementers These firms are not involved in - Quantitative survey asking for 9 Industry 4.0
with no Industry 4.0 the implementation of Industry preconditions, using a 4-point Likert scale.
preconditions (88) 4.0, nor do they fulfill the - Qualitative: asking an open-ended question for each
preconditions (they score in the precondition.
two lowest levels of the Likert
scale).
 18

Table 5. Number of SMEs in each typology (n=354)

Industry 4.0 plan

Yes No

Yes 88 SMEs 106 SMEs

Industry 4.0
implementation
No 4 SMEs 156 SMEs

3.5 Quantitative investigation

The preconditions and conditions shown in Table 2 were operationalized in two quantitative

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questionnaires as shown in Appendixes 1 (preconditions) and 2 (conditions). The exact phrasing

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and design of the scales was developed in several workshops between researchers, development

agencies and policy makers (see Table 1).

-p
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For the quantitative survey, 4-point Likert scales were chosen. By not offering a midpoint and
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providing only few options to choose from, a 4-point Likert scale serves the study’s objective to
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characterize groups that have been defined using qualitative methods (Revilla et al., 2014;

Weijters et al., 2010). The absence of a midpoint forces answers to express agreement and
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disagreement. Although the most used configuration is the 5-point Likert scale as the midpoint
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option allows respondents to express their uncertainty, the actors involved in the research process

argued that it provides them with an “easy” option to choose (Neuman, 2014). Further, a higher

number of scale items are not required for this study, as the quantitative approach serves to

characterize pre-defined groups rather than serving a more complex statistical model (Revilla et

al., 2014; Weijters et al., 2010).

Table 6 presents the measures taken against common method variance, endogeneity, and

unobserved heterogeneity in order to ensure causality of the correlations measured.

Table 6. Measures against common method variance, endogeneity, and unobserved heterogeneity

Potential problem Measures

 19

Common method As an initial procedure, we pre-tested and discussed the questionnaire

variance may be a with company representatives and country development agency staff to
concern (Podsakoff verify the clarity of our survey. To further test the magnitude of CMV,
et al., 2012), since we performed Harman’s single factor test in which a single factor loads
our survey is on all measured items. As the single factors explained less than 30% of
composed by single the total variance, the presence of CMV is below the threshold of 50%
respondents. (Podsakoff, 2012).

Endogeneity could We performed Stata’s estat endogenous procedure using the Durbin–
lead to biased results Wu–Hausman statistics to evaluate the consistency of our estimators. The
(Bascle, 2008). hypothesis that the explanatory variable is exogenous cannot be rejected
for several variable configurations chosen, i.e., all p-values > 0.05
(Bascle, 2008).
Unobserved We assessed the normality of our data by examining the skewness and
heterogeneity kurtosis values. The results suggest that our data is normally distributed
leading to errors in since all values are between the thresholds of ±2.58 (α = 0.01) (Hair et

f
correlations al., 2018). Further, we verified correlations to be causalities as well as

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(Shugan, 2006). understandability and relevance of constructs by the series of interviews
and workshops, as described in section 3.4, which were compared for
several industry sectors. Due to the long-term relationship between the

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country development agencies that know the SMEs investigated in detail,
-p
unobserved heterogeneity can further be ruled out (Bascle, 2008).
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In order to ensure reliability, validity, and generalizability, Table 7 summarized the respective

measures taken.
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Table 7. Measures for reliability, validity, and generalizability

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Requirement Measures
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Reliability For qualitative interviews forming the input for the quantitative
investigation, intercoder reliability was calculated following Holsti (1969)
and found to be sufficiently high. Further, measures and results were
discussed with SMEs as well as in a series of workshops between SMEs,
policy makers, and country development agency, among other stakeholders.

Validity Construct validity was ensured by the measures described in Table 6. In

addition, the co-design of measures and discussion of results among several
stakeholders and SMEs served to enhance validity further.
Generalizability Based on a structural analysis by the European Commission, we claim that
the findings are generalizable and transferrable to structurally equivalent
leading industrial regions throughout Europe (Navarro et al., 2014). Details
can be found in section 3.1.

IBM SPSS statistics software was used to generate correlation matrices for conditions and

preconditions. For this, Spearman’s correlation coefficients among preconditions and other

preconditions, or conditions and other conditions, were calculated depending on the respective
 20

SMEs (see Table 4). While 0 indicates no positive correlation, 1 resembles the maximum positive

correlation. Correlation coefficients below 0.3 are regarded as low effects, above 0.3 as medium

effects, and above 0.5 as high effects (Cohen, 1992). Medium and high effects are marked in bold

in the results tables (Tables 7, 9, 10, and 12), while insignificant results are not shown, i.e., p>0.05

(bilateral).

4. Results

We present the results corresponding to the analysis of the data gathered in the survey-based

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interviews with SMEs. These results allow each SME category to be characterized according to

the classification criteria set in section 3.2. In the following sections, each stage and the

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-p
characteristics of the corresponding group of SMEs are described, considering their fulfillment of
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Industry 4.0 resources as preconditions and conditions.
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Full implementers (88)

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These SMEs mainly belong to medium-high technology industries and are conscious of the

advantages derived from Industry 4.0 implementation, considering it a strategic bet. They usually
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start with an initial assessment of Industry 4.0 implementation, followed by a pilot project which
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involves integrating one or more 4.0 technologies and a further implementation by including an

Industry 4.0 strategic plan. Pressure coming from firms at the higher end of the value chain

accelerates these implementation processes, as occurs very often in the automotive sector for

instance. Table 8 shows some of the statements made by the county development agency staff

who interviewed the SMEs about the features describing this category of firms.

Table 8. Statements from the county development agencies staff regarding firms involved in

Industry 4.0 implementation and having an Industry 4.0 plan

 21

Topic Quotes
“The company is aware of the risk of not adopting digital technologies in its
daily activities and of the opportunities they entail for the improvement of
both internal and external efficiency for its customers.”
Motivation for “Because they have seen their competitors [in Industry 4.0], they have also
Industry 4.0 begun to carry out these types of actions.” “They have been working for 15
years in Industry 4.0, ‘pushed’ by their customers.”
“They collaborate with the cluster associations and technology centers,
whenever they need a specialist in any subject.”
“They find it difficult to hire staff with digital skills.”
Challenges “They created a new profile: the person with technological/digital
competences responsible for the factory.”

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Non-planner implementers (106)

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These SMEs are implementing Industry 4.0, but this process is not formally planned. Firms are

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-p
conscious of the potentials of Industry 4.0 and hence they are including Industry 4.0 in their
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current strategic reflection processes, although there is no formal strategy yet. Industry 4.0

technologies are mostly applied in the production phase and the analysis of existing resources
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conditions for Industry 4.0 reflects an adequate context for its implementation.
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The different dimensions are tested for correlations, and they are found to be statistically
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significant (Table 9). Two main significant patterns of correlations are shown: one concerning
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market size, competitiveness, servitization, and alliances (external dimension), and the other

related to efficiency, strategy, qualified staff, and investments (internal dimension). The first one

could be related to the external competitiveness as resources of firms, while the second one seems

to be more related to internal resources. Moreover, the matrix shows a strong correlation with

market conditions. The implementation of Industry 4.0 depends on the market demand, as the

dependence between this and the rest of conditions (except infrastructure) is strong.
 22

Table 9. Conditions correlation matrix for non-planner implementers (n=106)

Std.
Mean Dev 1 2 3 4 5 6 7 8 9 10
1 Market 2.774 0.721
2 Competitors 2.547 0.770 0.587**
3 Servitization 2.123 0.983 0.316** 0.261**
4 Efficiency 3.057 0.728 0.207* 0.202*
5 Strategy 3.000 0.743 0.376** 0.214* 0.310** 0.248*
6 Qualified staff 2.783 0.704 0.250** 0.321** 0.458**
7 Finances 2.981 0.756 0.261** 0.292** 0.421** 0.374** 0.287**
8 Alliances 2.594 0.848 0.415** 0.246* 0.334** 0.285** 0.310** 0.274**
9 Organization 2.651 0.829 0.256** 0.205* 0.201* 0.325** 0.272**
10 Infrastructure 2.906 0.981 0.242*
** The correlation is significant at the 0.01 level (bilateral).

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* The correlation is significant at the 0.05 level (bilateral).

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Table 10 presents some of the statements made by the county development agency staff

describing this category of firms.

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Table 10. Statements from the county development agencies staff regarding firms involved in
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Industry 4.0 implementation, but with no formal plan

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Topic Quotes
“Although they have no Industry 4.0 plan, there is total alignment with the
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firm’s strategic vision.”

Strengths “The investments for Industry 4.0 implementation are profitable, although we
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are still in the process of implementing these technologies.”

“They have funds available for new investments. They are also interested in
public programs.”
“They are not familiar with what servitization means and they feel alienated
from it.”
“They do not know what the exact position of their competitors is concerning
this topic and they do not have a formal analysis of this, but rather an
Challenges
informal view.”
“They do not feel the need for organizational changes because of Industry 4.0
implementation or they are not aware of its implications and potential
contribution.”
 23

Non-implementer planners (4)

This small group of SMEs shows their awareness of Industry 4.0 and their capability to foresee

future circumstances. The main reasons for non-implementing an Industry 4.0 transition plan are

the lack of demand coming from customers and the unavailability of financial resources for its

implementation. Because of the small subsample of only four SMEs, this group was not tested for

possible correlations, nor is it qualitatively described further.

Non-implementers with preconditions (73)

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This group of SMEs fulfills most of the preconditions for Industry 4.0, and its implementation is

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seen as a possibility for achieving efficiency gains, although implementation is pending. The

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-p
group mainly consists of process-oriented SMEs which supply semi-finished components, and

they consider that not having an own end-product as well as the characteristics of their sectors
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(low-technology industries) could limit their resources toward Industry 4.0.
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The correlation matrix in Table 11 shows statistically significant correlations among resources
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mostly associated with the internal dimension of firms (financial resources, alliances, and
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investments). However, this internal dimension also has correlations with the most external

conditions, except for competitors, which seems to be a critical condition. This means that the
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behavior of competitors influences the fulfillment of conditions in these SMEs.

Table 11. Conditions correlation matrix for non-implementers with preconditions (n=68)

Std.
Mean Dev. 1 2 3 4 5 6 7 8 9 10
1 Market 2.324 0.722
2 Competitors 2.088 0.707
3 Servitization 1.632 0.771 0.373**
4 Efficiency 2.309 0.966 0.308* 0.255* 0.265*
5 Strategy 2.221 0.844
6 Qualified staff 2.088 0.942 0.293* 0.468**
7 Finances 2.471 0.938 0.323** 0.299*
8 Alliances 1.941 0.751 0.257* 0.241* 0.421**
9 Organization 2.044 0.836 0.328** 0.332** 0.327** 0.461**
10 Infrastructure 3.132 0.960
 24

** The correlation is significant at the 0.01 level (bilateral).

* The correlation is significant at the 0.05 level (bilateral).
In comparison with non-planner but implementer SMEs, this group shows a weaker integration

level among the different conditions, although on average they exhibit a higher degree of

compliance in resources as preconditions, as can be seen in Table 12. Likewise, the matrix

illustrates the correlation between the product and innovation, internationalization, strategy, and

leadership conditions. This shows the importance of the product when implementing Industry 4.0

and developing further resources.

Table 12. Preconditions correlation matrix for non-implementers with preconditions (n=68)

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Std.
Mean Dev. 1 2 3 4 5 6 7 8 9
1 Products 2.456 1.057

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0.464*
2 Innovation
Internationalizatio
3 n
2.927

2.971
0.739

1.065
*

0.279*
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4 Alliances 2.706 0.830 0.275*
5 Skills Plan 2.618 0.881
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Skills 0.516*
6 Management 2.721 0.808 0.246* *
0.360* 0.353*
7 Strategy 3.044 0.700 0.300* * * 0.283*
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0.337* 0.404* 0.395*

8 Leadership 2.603 0.849 0.269* 0.261* * * *
9 Finances 3.206 0.659
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* The correlation is significant at the 0.05 level (bilateral).

** The correlation is significant at the 0.01 level (bilateral).
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Several of the statements made by the county development agency staff who interviewed the

SMEs, and which refer to the features describing this category are presented here in Table 13.

Table 13. Statements by the county development agencies staff regarding non-implementers with

preconditions

Topic Quotes
“They have a strategic view that combined with a shared leadership and an
appropriate management model contributes to efficiency.”
Strengths “Innovation is taking place, from process innovation to organizational and
market innovation.”
 25

“Collaboration is usually limited to clients and suppliers.” ‘The experience

with collaborators is not very good one and they feel that some of them (such
Challenges as technological centers) are too far to work together.”
“It is a traditional and hierarchical firm, although new generations are trying
to change the organizational model and foster participation.”

Non-implementers with no preconditions (88)

About 70% of the SMEs in this group do not have an own end-product and are working in low-

technology sectors where Industry 4.0 is not yet present, mainly in the metal industry. In general,

these SMEs show a very low level of compliance with resources as Industry 4.0 preconditions.

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Furthermore, this group is unaware of the advantages that could be derived from Industry 4.0

implementation.

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-p
As shown in Table 14, several correlations can be found. The associations seem to be stronger
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among the dimensions of product, innovation, and internationalization, and also among the
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dimensions of skills management, leadership, financial resources, and strategy. The first one

could be related to a product-oriented competitiveness model, while the second one seems to be
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related to preconditions for non-technological innovations.

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Table 14. Preconditions correlation matrix for non-implementers with no preconditions (n=88)
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Std.
Mean Dev 1 2 3 4 5 6 7 8 9
1 Products 2.159 1.123
0.367*
2 Innovation 2.296 0.775 *
Internationalizatio 0.389*
3 n 2.466 0.970 *
0.394*
4 Alliances 2.159 0.856 * 0.218*
0.364* 0.322* 0.383*
5 Skills Plan 2.330 0.813 * * *
Skills 0.311*
6 Management 2.386 0.808 0.213* *
0.431* 0.366*
7 Strategy 2.534 0.857 * 0.250* *
0.295* 0.287* 0.516*
8 Leadership 2.171 0.820 * 0.215* * *
9 Finances 2.682 0.796
* The correlation is significant at the 0.05 level (bilateral).
** The correlation is significant at the 0.01 level (bilateral).

The statements for this category of firms can be found in Table 15.
 26

Table 15. Statements by county development agencies staff regarding firms that are not involved

in Industry 4.0 implementation and do not fulfil the preconditions

Topic Quotes
“Internationalization is crucial in the firm. They have made significant efforts
Strengths in this area and they export 25% of their production.”

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“The firm has a good financial situation, and they have the capacity for new

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projects and investments.”
“There is a hierarchical and non-cooperative leadership model; staff do not

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know what the strategy of the firm is.”
Challenges -p
“There is no formal training plan; training is offered when needs emerge and
there is no provision for it.”
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5. Discussion
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Following the inclusiveness criteria described in the previous sections of the paper, and thus
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considering the most basic technologies as part of the path toward Industry 4.0, we find that 54%
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of SMEs are already involved in implementation processes of Industry 4.0. The main condition

for this implementation is the competitive pressure coming from value chains and imitation, while

strategic planning as a resource toward Industry 4.0 appears to be less relevant. This characteristic

seems to be typical of SMEs in the current development stage of Industry 4.0, with many of them

being pressured or at least demanded to develop toward Industry 4.0 rather than internally

motivated to do so (Horváth and Szabó, 2019; Müller et al., 2018).

Among the further 46% of SMEs which are not yet implementing Industry 4.0, there are two

different profiles. On the one hand, 19% of the interviewed SMEs are at a stage where they seem

to have the right resources, and thus the potential to integrate Industry 4.0, but are still not taking

this step. This behavior resembles the group of SMEs that are capable but reluctant to implement
 27

Industry 4.0 (Horváth and Szabó, 2019; Müller et al., 2018). By presenting examples of resources

acting as preconditions within this development stage, the paper contributes to the understanding

of why SMEs act in such a way toward the implementation of Industry 4.0.

On the other hand, however, the other group that makes up 25% of the interviewed SMEs lacks

even the most basic resources that would anchor them into a progressive evolution toward

Industry 4.0. To date, this group of enterprises has mainly been neglected in most studies devoted

to Industry 4.0, at least in Europe. For instance, many Chinese SMEs face the challenge of

transiting from a situation where they do not even have the necessary preconditions to implement

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Industry 4.0 to a full-scale implementation stage in a short space of time (Müller and Voigt, 2018).

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Regarding the differences found between the groups in different development stages which were
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described in the previous sections, we can gain new insights into the role that the various resources
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play in the transition between stages, as summarized in Figure 1.
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Figure 1. Development stages and resources of SMEs toward Industry 4.0

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 28

For non-implementers with no Industry 4.0 preconditions, the main resources required as

preconditions toward Industry 4.0 are aligned innovation management, strategy, and

internationalization. While aligned innovation management and strategy relate to internal

enablers of Industry 4.0, internationalization especially relates to creating market access that

SMEs often lack in contrast to larger organizations (Horváth and Szabó, 2019). This can include

the development of own products despite the predominant low-technology status, concomitant

with a new strategy toward more complex products which involves internationalization, such as

addressing a broader customer base. This category of SMEs is still often limited to workshop and

f
semi-standardized products, which makes Industry 4.0 implementation hard to achieve, even in

oo
its initial steps.

r
-p
The transition from being non-implementers with preconditions to non-planner implementers is
re
one of the transitions that provide several relevant insights. On the one hand, one of the main

differences is the market access or value chain position (i.e., firms further from the end customer).
lP

Further, the industry sector, mainly metal industry with semi-finished products in contrast to more
na

complex products, corresponds to one of the main reasons for Industry 4.0 implementation.

Further, when comparing these two groups, the first and more obvious difference is the fulfillment
ur

of resources required as conditions for Industry 4.0. The empirical differences in the comparative
Jo

analysis, with the exception of infrastructures, outline the robustness of the analytical framework

and the relevance of the resources acting as preconditions and conditions it proposes. The results

point to the importance of paying special attention to the resources related to strategical alignment,

qualification of employees and efficiency of processes (Mittal et al., 2018). Moreover, the

correlation analysis shows that implementer SMEs are characterized by following an integrated

management approach to foster the Industry 4.0 transition. This reinforces the argument that

Industry 4.0 implementation should be considered from a comprehensive perspective and avoid

isolated applications in some specific fields. This relates to the intended horizontal and vertical

interconnection, and the therefore required implementation of Industry 4.0 (Kagermann et al.,

2013).
 29

In the transition from being non-implementer planners to being full implementers, the resources

acting as main resources are the acceptance of Industry 4.0 in the markets and the availability of

financial resources for implementing the Industry 4.0 transition plan. Consequently, SMEs can

take a relevant role in Industry 4.0 only when they address a real customer demand, which can

either be already present, or responded to actively by reorienting the business model toward

Industry 4.0, e.g., adopting a service-based business model (Frank et al., 2019; Müller et al.,

2018). Finally, SMEs that are non-planner implementers could consider developing Industry 4.0

implementation plans in order to move toward the stage of full implementers, as it does seem to

f
reinforce the overall engagement of the firm with Industry 4.0. Moreover, the adaptation of

oo
management models, the analysis of competitors and market acceptance, the collaboration with

r
external actors from the innovation system and the development of new business models through
-p
servitization appear to be the main resources acting as conditions of this transition toward full
re
implementation.
lP

In comparison with extant research on maturity models toward Industry 4.0, this research makes
na

several contributions and extensions to the existing literature. The preconditions of having

adequate financial resources, skills, and strategy as an entering stage toward Industry 4.0 can
ur

generally be found in other studies (Colli et al., 2018; Mittal et al., 2018; Schumacher et al., 2016;
Jo

Wagire et al., 2020). But whereas most existing maturity models toward Industry 4.0 draw a

connection between technologies, strategy, culture and resources (Wagire et al., 2020), this paper

extends this view toward the importance of markets, the role in the value chain, extant business

models and servitization, as well as alliances and ecosystems. This has not been accomplished so

far in conjunction with the aforementioned aspects of technologies, strategy, culture, and

resources in its entity (Müller et al., 2018). The availability of adequate products and value offers

as a prerequisite for business models can be confirmed in extant literature and is further extended

in this paper regarding the dimensions of the market environment and competitors’ behavior in

different stages (Müller et al., 2018; Schumacher et al., 2016).

 30

Furthermore, our paper introduces several development stages of SMEs and respective resources

which are required to reach the next stage, whereas most existing models describe a status quo or

only refer to technological assessments (Mittal et al., 2018; 2019). In extant literature, only the

stage-gate model created by Müller et al. (2018) develops several stages and enablers toward

Industry 4.0. However, this model is limited to the perspective of business model innovation.

In sum, this study is the first to present several development stages of SMEs toward Industry 4.0,

incorporating different perspectives of extant literature into a common framework, as described

further in the theoretical implications in the next section.

f
r oo
6. Conclusion -p
re
6.1 Theoretical contribution
lP

This study is among the few publications connecting the RBV to Industry 4.0. It is able to gain a

better understanding of the relationships between different resources and how resources can be
na

combined to maintain sustainable competitive advantage, in this case development stages toward
ur

Industry 4.0, linking back to the original aim of the RBV (Barney, 2001; Peteraf, 1993, Salam,
Jo

2019).

Confirming and extending the findings of Bhandari et al. (2020), we find that the combination of

resources to achieve sustainable competitive advantage must be accompanied with a respective

managerial concept. This concept is represented in our study by the existence of an Industry 4.0

implementation plan. Likewise, SMEs with a higher degree of internationalization are able to

engage better in their surrounding markets, networks and ecosystems (Schmidt et al., 2020). In

the context of Industry 4.0, we confirm that, to overcome financial constraints, low bargaining

power, and market access requires an active strategy as well as an ability to network and acquire

knowledge (Müller et al., 2021; Paul, 2020; Ricci et al., 2021). In addition, we confirm that SMEs
 31

that have the ability to internationalize their business develop sustainable competitive advantage

and are further ahead on the path toward Industry 4.0 (Liñán et al., 2020).

Further, this paper is among the first to research in greater depth the implementation stages of

Industry 4.0 and its respective resources required for SMEs. Extant research has mainly focused

on maturity models for specific technologies or applications (Dutta et al., 2021; Mittal et al., 2018)

or limited to specific cases of companies (Amaral and Peças, 2021). This paper presents the results

of a co-design process between policy makers, development agencies, and SMEs which lasted for

more than two years. Thereby, it responds to the call for a better inclusion of policy in SMEs’

f
oo
requirements toward Industry 4.0 and a long-term perspective on Industry 4.0 implementation

rather than a single point in time (Mittal et al., 2018; Müller et al., 2018). Specifically, the focus

r
-p
here is on the required resources as preconditions and conditions for implementing Industry 4.0.
re
It this way, this paper brings Industry 4.0 research closer to the broad implementation process that

starts long before SMEs, which are already on the edge of Industry 4.0, actually implement it
lP

(Eiriz et al., 2018; Verhees et al., 2004). Thus, what is required is a broader implementation
na

process to be able ensure a spanning supply-chain integration of Industry 4.0, which should also

include the SMEs that are still far from Industry 4.0 implementation, as well as guaranteeing that
ur

preconditions and conditions are established from early on (Frank et al., 2019; Müller and Voigt,
Jo

2018; Müller et al., 2018).

In addition, previous research has shown that implementing Industry 4.0 in SMEs is in fact more

oriented toward operational benefits than toward strategic advantages (Müller et al., 2018; Sahi

et al., 2020). This paper helps to gain a more fine-grained perspective on this operational

orientation by showing the development stages toward Industry 4.0. Among others, the sector and

market as well as the type of products offered play a decisive role in whether an SME engages in

Industry 4.0 and how it approaches it. Therefore, this paper develops an understanding of how

research on SMEs in the context of Industry 4.0 should be guided toward the different

development stages and specific resources required in each of them.

 32

Moreover, the analytical framework confirms the assumption that SMEs first need to acquire

resources as preconditions toward Industry 4.0 in order to develop the necessary resources as

conditions that push them forward toward Industry 4.0. In this regard, the paper is able to show

that Industry 4.0 still requires several steps in between in order to fully unfold, especially in the

case of SMEs (Kagermann et al., 2013; Müller et al., 2018). This paper further presents a more

fine-grained view on important resources for SMEs regarding distinct development stages in

comparison with extant literature (Ghobakhloo and Iranmanesh, 2021).

From a methodological point of view, the paper shows how academia, public agencies, and SMEs

f
oo
can interact in order to support the implementation of Industry 4.0. The diversity of roles that can

be played by researchers in the context of the implementation of Industry 4.0 is understudied,

r
-p
while the role of external observers that gather data and analyze it to explore or predict Industry
re
4.0 is dominant in extant research. This paper shares an alternative type of process where

researchers worked as facilitators of the dialogue process among different policy makers in order
lP

to co-construct a methodology for analyzing Industry 4.0. Researchers contributed with

na

knowledge from academia and examples on how Industry 4.0 has been studied in other contexts.

Policy makers contributed with their experience in practical design of Industry 4.0 policies and
ur

inclusive policy making. Collaboratively, they co-constructed a methodology that not only
Jo

integrates the state of the art, but also responds to the specificities of SMEs. Therefore, the paper

adds to the understanding of the complex implementation process of Industry 4.0 in the

intersection of politics, public institutions, industry associations, research, and the actual SMEs

involved (Kagermann et al., 2013; Müller et al., 2018).

6.2 Managerial implications

This paper can help SMEs gain a better understanding of their positioning, current development

stage and resources that act as preconditions or conditions of Industry 4.0 implementation. Hence,

SMEs are presented with a comprehensive overview of the development stages toward Industry

4.0 and their respective resources, which allows them to question their current positioning and to
 33

actively engage in their behavior toward Industry 4.0 instead of reacting passively. Moreover, by

knowing which resources as preconditions and conditions exist for each development stage,

SMEs are able to think “one step ahead.” For instance, they can actively shape the creation of

their necessary preconditions and conditions in advance. Further still, when they reach a particular

development stage, they will have a clearer idea of what the respective required resources are so

that they can move forward toward Industry 4.0.

With regards to non-planner implementers, we recommend that they formalize the planning and

implementation activities toward Industry 4.0, paying special attention to fulfilling the required

f
oo
external and internal resources. Concerning the external dimension, we recommend that market

demands and competitors must be considered better, while adopting service-based business

r
-p
models and forming adequate alliances. From an internal perspective, we recommend an
re
appropriate organizational model and qualified staff in order to implement Industry 4.0.
lP

For non-implementers with preconditions, we recommend that the external environment of the

SME should be considered in order to find possible applications for Industry 4.0. It may be the
na

case that their existing markets and customer groups have not yet demanded products and services
ur

associated to Industry 4.0. However, by developing service-based business models and forming
Jo

alliances for Industry 4.0-based business models, these SMEs can prepare themselves to engage

in new markets, which could in turn lead to new service offerings and Industry 4.0-based business

models for their existing customer base in the near future. Likewise, appropriate organizational

changes including processes to hire qualified staff or collaboration with externals may prove to

be crucial.

For non-implementers with no preconditions, extending innovation and R&D-activities and

expanding the range of products is recommended. Through the combination of adequate skills

management, leadership and collaboration strategies, these enterprises might then be able to

create the required resources as preconditions or conditions for Industry 4.0. Furthermore,
 34

rethinking their own positioning toward Industry 4.0 and their extant business model might help

them to be better prepared for the future, when Industry 4.0 may become more relevant for them.

From the perspective of politics and public support, there are two lessons that have been learnt

from the case which can help SMEs on their path toward Industry 4.0 implementation. The first

is the role played by proximity agents (county development agencies in this case), in collaboration

with other government levels with competences in industrial policymaking (the Provincial

Council in this case). This paper proposes multilevel governance as a mechanism that can help

governmental institutions to play a better role (Estensoro and Larrea, 2016) by integrating

f
oo
proximity agents like county development agencies. These do not have formal competences

regarding industrial or innovation policies, but are closer to SMEs, allowing them to meet

r
-p
managers face to face and maintain a continued relationship. Thus, multilevel governance can
re
help manufacturing SMEs approach Industry 4.0 positively by generating the context where

authorities, governmental agencies and international associations can effectively assist smaller
lP

firms with the process of Industry 4.0 implementation (Ghobakhloo, 2018; Müller et al., 2018).
na

In addition, this paper highlights the connection between social and economic goals addressed
ur

through the inclusive nature of the policy process that framed the analysis of SMEs, which is a
Jo

key feature of the methodology applied. Inclusiveness was interpreted as an effort to adapt

policies to the specific needs of firms, depending on their situation. Several European regions and

states have set Industry 4.0 as one of their priorities, but the diversification process is not reaching

SMEs in every sector, such as the manufacturing industry (Müller et al., 2018). Therefore, this

paper highlights the need to integrate SMEs in the implementation process of Industry 4.0 and

presents the different implementation stages and respective resources that policy makers,

governmental institutions and industry associations can adapt to specific regional requirements.

6.3 Limitations and further research

This paper presents a study conducted in one specific territory. Whereas the mixed-method

approach that was used in a period over two years served to provide a broader insight into the
 35

implementation of Industry 4.0, the respective methods used individually bear several limitations.

For instance, the usage of single construct items or constructs mainly derived from interviews and

workshops rather than a theoretical model limits the statistical results of the quantitative approach.

However, we claim that as the quantitative approach serves to enrich the qualitative results by

presenting additional information on qualitatively defined categories of SMEs, this limitation is

bearable.

Further, the regional focus also limits the generalizability. As the integration of policy makers,

development agencies and further stakeholders in the process brings many benefits, it also tailors

f
oo
the research approach very closely to the requirements of the specific territory. This does not

allow a comparison easily as opposed to choosing established models and testing them in the

r
-p
regional context. However, according to a report for the European Commission, structural
re
similarities with leading industrial regions in Europe allow to transfer the results (Navarro et al.,

2014).
lP

In order to further develop the discussion on the implementation stages and its respective
na

resources and to validate the results of this study, the findings should be extended by conducting
ur

comparable studies in other regions or in several regions. Further comparisons of influential

Jo

factors, such as including further industry sectors, firm sizes, or positions within the value chain,

could present a fruitful research avenue. Lastly, the recommendations given, and the

implementation stages described present the current situation of development toward Industry

4.0. Hence, the effectiveness of the measures proposed and the development over time within the

categories of SMEs identified should be supervised closely in future studies. In this regard, it

could be of particular interest to observe the behavior of SMEs that are not engaging in Industry

4.0 implementation, i.e., which resources motivate them to participate in the implementation or

whether their current business model requires them to engage in Industry 4.0 and to what extent.

In sum, this paper contributes to a better understanding of how different resources serve to

develop sustainable competitive advantage for SMEs, differentiated in four different stages of
 36

development toward Industry 4.0. Respective preconditions and conditions are derived for each

stage, highlighting what resources are required for an SMEs to achieve the next stage. The broad

sample of 354 SMEs in Gipuzkoa that is analyzed by qualitative and quantitative means allows

to transfer the results to other European regions, considering the high importance and advanced

position of industrial SMEs in the Basque Country.

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Appendix 1: Resources as preconditions questionnaire

Precondition Possible answers (4-point Likert scale)
Strongly agree: It is directly marketed.
Agree: We develop our own product but do not market it directly, or we have initiated the
Products development of one/several own products.
(access to end Disagree: We do not have an own product but are interested in having one and we are exploring
customer) options.
Strongly disagree: We do not have an own product, nor do we have any plans to develop one. We
will continue to manufacture according to specifications.
Strongly agree: We innovate regularly. During the last two years we have introduced innovation

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of some kind and have defined an innovation system.

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Agree: During the last two years we have introduced innovation of some kind, but we do have any
innovation system.
Innovation
Disagree: During the last two years we have not introduced innovation of any kind but would like

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to improve our conditions to do so.
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Strongly disagree: During the last two years we have not introduced innovation of any kind and
we do not have the necessary conditions to do so in the coming years.
Strongly agree: We export directly. The percentage is higher than 15%.
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Agree: We export indirectly and in a small percentage.
Internationaliz Disagree: Our company is not an internationalized one, but we would like to improve our
ation conditions to do so.
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Strongly disagree: Our company is not an internationalized one and we expect our market to be
regional/national.
Strongly agree: We collaborate continuously according to our strategic plan.
Agree: We collaborate sporadically without any specific plan.
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Alliances
Disagree: We have never collaborated but are willing to do so.
Strongly disagree: We have never collaborated and do not think it is necessary to do so.
Strongly agree: We have a training program.
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Agree: We have a training program but have not implemented it or do not follow it.
Disagree: Our employees develop their competences but we do not have any formal training
Skills Plan
program.
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Strongly disagree: We do not have any competence development plan and we do not consider it
necessary.
Strongly agree: We have a competence development plan and the staff’s views and proposals are
taken into account.
Agree: Despite not having any plan, the development of competences is encouraged and, in
Skills general, the staff’s views and proposals are taken into account.
Management Disagree: We do not have any competence development plan nor any tools to gather staff’s views,
but we would like to progress in this regard.
Strongly disagree: The company has a hierarchical structure and staff’s competences are not
developed.
Strongly agree: A strategic plan has been developed and drawn up in a document.
Agree: The plan is not included in any document but it has been developed or those in charge have
it in mind.
Strategy. Disagree: There is no clear or defined strategy nor do we have a strategic plan, but we are
interested and are intending to work on this issue.
Strongly disagree: There is no clear or defined strategy, and there is no interest or intention to
change our way of working.
Strongly agree: A leadership model in which managers take decisions and risks, anticipate
problems and encourage the staff to participate.
Agreement: The previous characteristics are only partly fulfilled.
Leadership
Disagree: The previous characteristics are not fulfilled, but we want to work in that direction.
Strongly disagree: The previous characteristics are not fulfilled, nor is there any possibility or
interest to do so.
Finances
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Strongly agree: We have sufficient financial resources (investment capacity) and do not have
any needs in this regard.
Agree: We do have financial needs but we are taking the necessary steps to address them and
have already begun to obtain resources.
Disagree: We do have financial needs but have not yet taken any steps to address them nor have
we obtained any result in this regard.
Strongly disagree: We do have financial needs but we cannot obtain any funding nor see any
possibility of obtaining it.

Appendix 2: Resources as conditions questionnaire

Condition Possible answers (4-point Likert scale)
Strongly agree: Industry 4.0 has been implemented in our market sector/field and when
analyzing its trend. We see a clear development.
Agree: Some companies in the market sector/field have started to develop Industry 4.0 ideas.
Market
Disagree: Only a few companies in the market sector/field have started to develop Industry 4.0
Strongly disagree: Considering the characteristics of our market sector/field, it is highly

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improbable that digital technologies or particularly Industry 4.0 technologies will be used.

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Strongly agree: All or almost all the main competitors are already implementing Industry 4.0
Agree: A few competitors are implementing Industry 4.0
Competitors
Disagree: Our competitors, in general, are not implementing Industry 4.0

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Strongly disagree: There is no competitor implementing Industry 4.0
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Strongly agree: We are taking (tangible) steps toward servitization.
Agree: We are planning to move toward servitization and we are defining the steps to be taken.
Disagree: We are not planning to move toward servitization now or in the near future, and the
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Servitization
steps to be taken have not been defined.
Strongly disagree: We do not see ourselves moving toward servitization in the future nor have
we even considered it.
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Strongly agree: Our company is obtaining a return on the investment or has reasons to believe it
will in the future (the project feasibility can be determined).
Agree: We believe we could obtain a return on the investment, but we do not have any proof yet
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Efficiency or have certain doubts about it.

Disagree: We do not believe we will obtain any return on the investment, but we are not certain
of it.
Strongly disagree: We do not believe it can be profitable.
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Strongly agree: We have designed a single strategy that includes both.

Agree: They are not yet fully aligned, but lines of action have already been established which
will enable them to converge.
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Strategy
Disagree: They are not two different strategies, but we do not see any possibility of aligning
them or we have not defined this process.
Strongly disagree: They are two completely independent strategies.
Strongly agree: We do not need to hire extra staff, because we can cover our needs with the
company's employees. Furthermore, we have started a training program (with specific training
needs) and our staff is being trained to develop the skills required by the project or our staff does
not need additional training.
Agree: We need to hire specialized staff and we have already taken the necessary measures. We
Qualified staff
have already begun to set up a training program to develop our workers’ skills.
Disagree: We need to hire specialized staff or to acquire new skills, but we still have not
established any line of action in this regard.
Strongly disagree: We need to hire specialized staff or to acquire new skills, but we still have
not thought of taking any actions in this regard.
Strongly agree: We have sufficient financial resources (annual balance) and do not have any
needs in this regard.
Agree: We do have financial needs but we are taking the necessary measures to address them
and have already begun to obtain resources.
Investments
Disagree: We do have financial needs but we have not yet taken any measures to address them
or we have not obtained any result in this regard.
Strongly disagree: We do have financial needs, but we cannot obtain any funding nor see any
possibility of obtaining it.
Strongly agree: We collaborate continuously according to a strategic plan.
Agree: We collaborate sporadically without any specific plan.
Alliances
Disagree: We have never collaborated but are willing to do so.
Strongly disagree: We have never collaborated and we do not think it is necessary to do so.
 44

Strongly agree: New departments have been created.

Agree: The duties and activities of certain employees have been changed and the corresponding
Organization training actions have already been established.
Disagree: There have been no changes yet, but certain modifications are being planned.
Strongly disagree: There have been no changes and no modifications are planned.
Strongly agree: We do have a high-speed network.
Agree: At present we do not have a high-speed network, but it is going to be built.
Disagree: We do not have a high-speed network but we are assessing whether to build it; or
Infrastructure
high-speed networks cause problems.
Strongly disagree: We do not have a high-speed network and we do not expect that this situation
will change; or no effort is being made in this regard.

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 Highlights

- Investigates Industry 4.0 implementation in 354 SMEs in Gipuzkoa (Spain).

- Develops conditions and preconditions for the implementation of Industry 4.0.
- Derives a model of Industry 4.0 implementation with several stages.
- Presents required resources for Industry 4.0 implementation in each stage.
- Gives managerial implications for SMEs towards Industry 4.0 in each stage.

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