sustainability

Article
Challenges of Industry 4.0 Technology Adoption for
SMEs: The Case of Japan
Martin Prause
Institute for Industrial Organization, WHU—Otto Beisheim School of Management, 56179 Vallendar, Germany;
[email protected]




Received: 26 August 2019; Accepted: 16 October 2019; Published: 19 October 2019


Abstract: In the light of several national advanced manufacturing strategies such as Industry 4.0
in Germany or the Made in China 2025 initiative in China, this article examines the challenges of
Industry 4.0 adoption of Japanese small and medium-sized manufacturing firms. A technology
adoption model for Industry 4.0 is developed and empirically tested with 38 manufacturing companies.
The results yield that the market uncertainty of the firm’s business is a significant driver for adoption
in the short, medium, and long-term. Relative competitive advantage matters in the short term and
top management support in the long-term. No support has been identified concerning advanced
manufacturing complexity and market transparency of Industry 4.0 solutions.

Keywords: advanced manufacturing; industry 4.0; SME; technology adoption model

1. Introduction
Manufacturing is the backbone of large economies such as the U.S., Europe, China, or Japan.
Changing demographics, globalization, scarcity of resources, the challenges of climate change, and
mass customization are the megatrends that challenge the future of manufacturing [1]. These changes
imply volatile, uncertain, complex, and ambiguous environments for firms and affect them across their
strategic environment [2]. Various initiatives emphasized the urgency for advanced manufacturing
strategies to tackle those challenges and support economic growth [3].
Industry 4.0 facilitates the balancing act of internal and external complexity by shifting traditional
production systems from a structured centralized control to decentralized control. It is a specific
deployment of an advanced manufacturing strategy. The core principles of Industry 4.0 are
modularization, self-regulation, and digital integration across business functions and within and
beyond the organizational boundaries. Industry 4.0 induces product innovation based on the usage
of intelligent sensor and actor systems to facilitate context-sensitive production processes and ICT
based process innovation to integrate production processes across the value chain, value network, and
product lifecycle.
While the manufacturing industry is the backbone of large economies such as the U.S., Europe,
China, or Japan, small and medium-sized enterprises (SMEs) are the foundation for manufacturing
industries. Small and medium-sized enterprises are very flexible in adapting new technologies and
catering niche markets, while large corporates are better on scale efficiencies but slower in adapting
innovations [4]. Therefore, it is essential to study the challenges of information technology adoption
concerning the concept of Industry 4.0 for small and medium-sized enterprises to accelerate the
diffusion of advanced manufacturing.
This article contributes to the body of knowledge in two ways. First, a technology adoption model
is presented that accounts for the particularities of Industry 4.0 information technologies, and second,
this model is empirically tested, and the results are discussed.

Sustainability 2019, 11, 5807; doi:10.3390/su11205807 www.mdpi.com/journal/sustainability

Sustainability 2019, 11, 5807 2 of 13

2. Technology Characteristics of Industry 4.0

Industry 4.0 is defined as the “[ . . . ] integration of cyber-physical-systems in production and
logistics as well as the application of the Internet of Things in industrial processes. This includes the
consequences for the value chain, business models, services, and work environment” [5]. While some
advanced manufacturing strategies include the usage of new materials, advanced human-machine
interaction, assistive (ambient) systems, and factory virtualization, the common element in all
definitions is the linkage of physical systems and virtual systems using information and communication
technologies for facilitating manufacturing processes.
It consists of two innovation types: product and process innovation. On the product innovation
side, it is the integration of cyber-physical systems (CPS) to integrate context-aware and self-adaptive
production processes. Using machine learning techniques on higher ICT levels, the monitored data from
sensors can be used to control embedded actors to respond to environmental changes (self-regulatory).
This is depicted in the stages of the 5C architecture of a CPS, ranging from smart connections to data
conversion, cyber integration, cognition, and self-configuration [6]. Based on technology such as
the Internet of Things (machine-to-machine communication), Internet of Service (machine-to-human
communication), and Internet of People (virtual human-to-human communication), CPS integrates
the physical world of productions vertically. Successful implementation of CPS is based on “[ . . . ]
horizontal integration through value networks, end-to-end digital integration of engineering across
the entire value chain, vertical integration, and networked manufacturing systems” [5]. This implies
that product and process innovation has to be implemented in combination and not separately.
From a technical perspective, these two elements of the advanced manufacturing strategies,
cyber-physical systems, and digital integration of production and business processes are not new in the
industrial context. Notably, both parts are the core principles of a so-called Smart Factory. The Smart
Factory idea is based on transferring the ubiquitous (wireless) computing to an industrial context [7].
A Smart Factory is a “[ . . . ] Factory that context-aware assists people and machines in execution
of their tasks [ . . . ] by systems working in background, so-called Calm-systems and context-aware
applications” [8]. A Smart Factory masters the complexity challenge by modularization of its
components and self-regulating mechanics based on context-aware applications. A self-adaptive
system, such as the Smart Factory, addresses the complexity issue by automatically modifying itself in
response to changes in its operating environment. A Smart Factory is robust and increases production
efficiency by enabling communication flows among humans, machines, and resources, just like
communication flow in social networks [5].
The key implication of linking production processes with business functions using context-aware
systems is the ubiquitous real-time availability and analysis of data for self-regulatory behavior [9].
Other authors refer to the Smart Factory concept as Industrial Internet, Intelligent Manufacturing,
Digital Factory, Ubiquitous Factory, or Factory 4.0 [10,11].
The technological enablers for deploying cyber-physical systems and ICT-integrated
production-business processes are advanced technologies in Big Data Analytics, Cloud Computing,
Internet of Things, and virtualization/simulation technologies for education and assistance [2,12].
However, not all enablers have reached a certain readiness level [13]. Due to the uncertainty of
economic rents involved with each technological readiness level, SMEs will adopt mature technologies,
likely adopt technologies that reached the evaluation stages and hesitate to adopt technologies in its
infancy. Specifically, maturity models for small-and-medium-sized enterprises should be different
from multinational-enterprises due to their specific requirements [13].

3. Technology Adoption Models

A list of models, tailored to the particular product and process innovation characteristics and the
SME context, is added to the annex of this article. General concepts differentiate between the adoption
perspective of an organization and an individual, where this study takes the firm’s view.
Sustainability 2019, 11, 5807 3 of 13

Roger’s innovation diffusion theory (IDT) states that potential adopters evaluate the following
technical characteristics to assess the adoption of an innovation: first, the relative advantage of the
innovation compared to the competition and its compatibility with the existing infrastructure are the
most significant adoption determinants [14]. Second, in terms of complexity and trialability, a firm also
evaluates the external organizational context to suppliers, customers, or governmental authorities in
terms of efficiency gains or possible constraints from the adopted innovation [15].
The Technology, Organization and Environment framework (TOE) [16] is a widely accepted
framework [17] which identified three constructs that are vital to adopt an innovation: (1) availability,
best practices, and equipment, (2) firm size, communication processes and managerial structure, and
(3) industry characteristics, market characteristics, and technology support.
Following the arguments by Scott [18], institutional environments such as business partners or
competitors shape organizational structures and actions, which leads to the inter-organizational model
(IO) based on the constructs of (1) perceived benefits, (2) organizational readiness, and (3) external
pressure. Raymond [19] underlines this approach and postulates that IDT and TOE frameworks “[ . . . ]
need[s] to be enriched when the innovation relates to complex technologies with an inter-organizational
locus of impact, for which adoption decisions are linked (e.g., when imposed by business partners)
and when the innovation is adopted by organizations” [19].
This has been implemented by Chau and Tam [15], where the authors propose a model based on
the TOE framework and added product-specific characteristics to study the adoption of open (software)
system standards: (1) external environment e.g., market uncertainty, (2) organizational technology
such as complexity of IT infrastructure, satisfaction with existing system, formalization on system
development & management, and (3) open system characteristics like perceived benefits, perceived
barriers, interoperability, and interconnectivity.
While Iacovou et al. [20] incorporated inter-organizational aspects, Chatterjee et al. [21] argued that
the adoption of specific information and communication technologies are guided by intra-organizational
cooperation. Following the argumentation by Swanson [22], the adoption decision must be coordinated.
This is reflected in their model, which incorporates top management factors such as beliefs towards
innovation, participation in the adoption process, and strategic investment rationale.

4. Method
For the development of the technology adoption model, Industry 4.0 is defined as the digital
integration of the production system with the company’s business functions using self-regulatory
sensor-actor networks (CPS) in combination with information and communication technologies.
The constituting constructs are: (1) the usage of technologies which continuously monitor processes
from inbound logistics, production and outbound logistics to regulate the respective processes
autonomously depending on changes in the environment, (2) the real-time availability and analysis of
the monitored data to other business functions such as administration, research and development,
service, marketing and sales and, (3) the usage of software system for automatic data exchange between
business functions such as administration, research and development, service, marketing and sales.
For the sake of ease use in a survey, these elements are summarized as self-adaptive technologies and
digitalized processes in the individual survey items.
On the one hand, a CPS is considered as product innovation due to its technological foundation.
On the other hand, the aligned software-oriented information technologies are considered process
innovation because they combine, align, and integrate the CPS components with the existing business
processes. This study follows the approach of Fichman and Kemerer [23] and Chau and Tam [15],
where the authors highlight that a complicated technological innovation, such as Industry 4.0, should
add innovation specific adoption characteristics in addition to the traditional ones. Therefore, the
research model builds on the TOE framework and incorporates independent variables from other
models to match the context of small and medium-sized enterprises and the characteristics of the
Sustainability 2019, 11, 5807 4 of 13

Sustainability 2019, 11, x FOR PEER REVIEW 4 of 13

innovations. The dependent variable is a construct of adoption intention and the early stages of
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4.1.General
4.1. GeneralTechnological
Technological Factors
Factors

4.1.1. Complexity
4.1.1. Complexity
Complexity is the degree to which the technologies are perceived as challenging to understand
Complexity is the degree to which the technologies are perceived as challenging to understand
and use [24,25], and it is typically negatively correlated with adoption [25]. The lack of knowledge
and use [24,25], and it is typically negatively correlated with adoption [25]. The lack of knowledge is
is the second major obstacle for Industry 4.0 adoption for SMEs [12]. Complexity can be measured
the second major obstacle for Industry 4.0 adoption for SMEs [12]. Complexity can be measured in
in terms of number and diversity of relationships and number and diversity of elements within a
terms of number and diversity of relationships and number and diversity of elements within a given.
given. Cyber-physical systems consist of multiple specialized heterogeneous devices and operate in a
Cyber-physical systems consist of multiple specialized heterogeneous devices and operate in a
changing environment. In combination with data analysis and ICT integration with business functions,
changing environment. In combination with data analysis and ICT integration with business
product innovation is considered to be complex. Technological communication standards and protocols
functions, product innovation is considered to be complex. Technological communication standards
must be established to guarantee a smooth integration of data exchange across business functions.
and protocols must be established to guarantee a smooth integration of data exchange across business
The orchestration of multiplicity of hardware and software is a complex task [25]. Based on established
functions. The orchestration of multiplicity of hardware and software is a complex task [25]. Based
measures by Premkumar and Roberts [25] and Jeon et al. [26] the indicator is operationalized as:
on established measures by Premkumar and Roberts [25] and Jeon et al. [26] the indicator is
operationalized as:
Sustainability 2019, 11, 5807 5 of 13

• The skills required to use self-adaptive technologies and digitalized processes are too complex for
our employees.
• Integrating self-adaptive technologies and digitalized processes in our current work practices will
be very difficult.

Hypothesis H1. The lower the perceived complexity of the advanced manufacturing technologies, the more
likely they will be adopted.

4.1.2. Compatibility
Compatibility is the degree to which technological innovation can be easily integrated with the
existing infrastructure and processes [24]. If the innovation is compatible with current practices and
technological infrastructure, adoption is more likely, according to Cooper and Zmud [27]. The shift
from centralized controlled production to decentralized (self-adaptive) controlled production is a
substantial change for the organization. According to Premkumar and Roberts [25], it is essential for
small businesses that the changes are compatible with the organizational culture. Otherwise, it may
result in resistance. Chatterjee et al. [21] highlight, in the context of e-business, that higher technological
compatibility of the innovation with the existing system implies higher adoption capability of the
organization. Old production systems are strong inhibitors to adopt Industry 4.0. Based on these
measures, this indicator is operationalized as:
• The changes introduced by self-adaptive technologies and digitalized processes are consistent
with the firm’s existing beliefs/values.
• The self-adaptive technologies and digitalized processes are compatible with existing
IT infrastructure.
• The self-adaptive technologies and digitalized processes are compatible with the firm’s existing
experiences with similar systems.

Hypothesis 2 (H2). The greater the perceived compatibility of the advanced manufacturing technologies with
current infrastructure, values, and beliefs, the more likely they will be adopted.

4.1.3. Relative Advantage

Relative advantage is the degree of additional benefit for the organization from adopting the
innovation compared to the status quo, according to Roberts [24]. A recent study by Commerzbank [28]
on the impact of the digital trend on manufacturing firms revealed that firms tend to accelerate ICT
integration to establish new business models and innovations to counter the competitive pressure
and short product life cycles. Relative advantages are referred to in recent models as a perceived
benefit [20]. Roger’s and Iacovou’s model indicate both that understanding the relative advantage
increases the likelihood of adoption. Therefore, advanced manufacturing is expected to be able to give
organizations a better competitive advantage. Based on established measures by Iacovou et al. [20],
Premkumar and Roberts [25], Hsu et al. [29], Gibbs and Kraemer [30] and Oliveira and Martins [31],
the indicator is operationalized as:
• Self-adaptive technologies and digitalized processes will allow us to better respond to
customer needs.
• Self-adaptive technologies and digitalized processes will allow us to cut costs in our operations.
• Implementing self-adaptive technologies and digitalized processes will increase the profitability
of our business.
• Self-adaptive technologies and digitalized processes provide timely information for
decision making.

Hypothesis 3 (H3). The greater the perceived relative advantage of the advanced manufacturing technologies,
the more likely they will be adopted.
Sustainability 2019, 11, 5807 6 of 13

4.1.4. Cost
Tornatzky and Klein [14] state that technologies that are perceived to be low in cost are more
likely to be adopted. Also, Premkumar and Roberts [25] highlight that for small businesses, the cost of
hardware/software is a sever inhibitor for adoption. The study by Wischmann et al. [12] revealed that
lack of resources, both financial and human resources, is the major obstacle for small and medium-sized
companies. Based on established measures by Premkumar and Roberts [25] and Jeon et al. [26], the
indicator is operationalized as:

• The costs of adoption of these self-adaptive technologies and digitalized processes are far greater
than the benefits.
• The cost of maintenance and support of these self-adaptive technologies and digitalized processes
are very high for our business.
• The amount of money and time invested in training employees to use these self-adaptive
technologies and digitalized processes is very high.

Hypothesis 4 (H4). The smaller the perceived cost/benefit ratio of the advanced manufacturing technologies,
the more likely they will be adopted.

4.2. Environmental Factors

4.2.1. Market Uncertainty

External organizational factors like megatrends or economic fluctuations affect the way business
is conducted. Market uncertainty stems from all technological, social, ecological, and political areas
such as technological disruptions, degree of competition, volatility in demand, uncertain supply, and
political [15]. This market uncertainty induces tension to the outer and inner complexity of a firm,
which as to be balanced [2]. Self-adaptive systems such as the Smart Factory facilitate the balancing
act [10]. The authors explain how cyber-physical systems support mass customization and handle
market uncertainties. Therefore, it is assumed that a higher degree of market uncertainty is positively
correlated with the likelihood of adopting advanced manufacturing technologies. In other studies,
this construct is represented by competitive pressure [25,26], perceived industry pressure [32], or
competition intensity [29]. Based on established measures by Chau and Tam [15], this indicator is
operationalized as:

• The market for firms’ products/services is stable.

• The competition of firms’ products/services is stable.
• The demand for firms’ products/services is stable.
• The degree of loyalty of their major customers is stable.
• The frequency of price-cutting in the industry is stable.

Hypothesis 5 (H5). The higher the market uncertainty for the company’s business, the more likely the advanced
manufacturing technologies will be adopted.

4.2.2. Industry Cluster

Since the first industrial revolution, it has been observed that firms tend to cluster in specific
geographic regions. While this has been driven by the availability of resources in the first place and the
need to secure them, this changed with the second industrial revolution when the infrastructure (power
and transportation) allowed firms to settle independently of large cities. With the rise of automation
and machinery-based manufacturing, access to the labor market, and close proximity to suppliers
became more critical [33]. This clustering of firms creates externalities such as reduced labor cost
or knowledge spillover because, in a reciprocal way, it attracts more people to the region, which in
turn reduces the cost of labor [34]. However, the degree of those positive externalities depends on
Sustainability 2019, 11, 5807 7 of 13

the affinity of the firm to the existing cluster. A cluster of similar manufacturing SMEs (similar/same
industry) will benefit from a large specialized workforce to a greater extent than SMEs from different
industries due to labor pooling and sharing of inputs. In the Marshall-Arrow-Romer model [35], this is
described as externalities due to specialization, where this leads to knowledge spillovers, and if similar
firms collocate in one region (cluster), it fosters innovation due to competition.
On the other hand, in Jacob’s model [36], SMEs from different industries strive for innovation
due to knowledge spillovers based on different labor skills in high-tech industries [34]. In addition
to industry affinity externalities, whether based on specialization or diversification, Alacer and
Chung [37] highlight the importance of firm size on the agglomeration effects. Large firms typically
experience a higher knowledge drain than SMEs, which benefit from it (knowledge gain). Based on
this argumentation, the indicator for this construct is defined as:

• The company resides in a geographic, industrial area.

• The companies within the geographic, industrial area stem from many diversified industries.

Hypothesis 6 (H6). The higher diversity in an industry cluster, the more likely the advanced manufacturing
technologies will be adopted.

4.3. Organizational Factors

4.3.1. Top Management Support and Championship

According to Chatterjee et al. [21], top management championship is an important factor for
assimilating information technologies, such as Web technologies, because it defines institutional
norms and values how the company perceives the innovation. If the top management believes in the
innovation and actively shapes the vision and strategy, this serves as a strong signal to the organization
to overcome obstacles in the assimilation process. The significance of top management beliefs and
active participation has been demonstrated in various studies [21]. Thus, top management support is
positively related to adoption [25]. This is supported by Wischmann et al. [12], which highlight that
the lack of a digital vision by the top management is an inhibitor to implement Industry 4.0. Based on
established measures by Chatterjee et al. [21], this indicator is operationalized as:

• The top management is likely to invest funds for self-adaptive technologies and
digitalized processes.
• The top management is willing to take risks in the adoption process of self-adaptive technologies
and digitalized processes.
• The top management is likely to be interested in adopting the self-adaptive technologies and
digitalized processes.
• The top management is likely to consider the adoption of the self-adaptive technologies and
digitalized processes as strategically important.
• The top management has articulated a vision or strategy for the organizational use of self-adaptive
technologies and digitalized processes.

Hypothesis 7 (H7). The higher the top management support and championship for advanced manufacturing
technologies, the more likely they will be adopted.

4.3.2. Satisfaction with the Existing System

The shift from centralized production to decentralized (self-adaptive) production is a substantial
change for the organization. As highlighted by McGaughey and Snyder [38], human resistance to
change was one major factor that hampered the success of computer integrated manufacturing in
the 1990s. Resistance to change or motivation for change stems from two sources: lack of skills or
satisfaction with the existing system. Because a lack of skills is already covered by the complexity
Sustainability 2019, 11, 5807 8 of 13

construct, this construct follows the argument by Rogers [24] that a low satisfaction level with the
existing system is perceived as a performance gap and will motivate the organization to improve
performance. Based on established measures by Chau and Tam [15], this indicator is operationalized as:
• The existing production system serves the needs of the company.
• The existing IT system serves the needs of the company.
• The cost/performance of the production system satisfies the top management.
• The cost/performance of the current IT system satisfies the top management.

Hypothesis 8 (H8). The higher the satisfaction with the existing system, the less likely the advanced
manufacturing technologies will be adopted.

4.3.3. Organizational Structure

The effect of organizational structures such as centralization (degree of organizational hierarchy)
and decision-making processes is debatable according to Kimberly and Evanisko [39]. A centralized
organizational structure can be positively or negatively correlated with technology adoption behavior.
In the context of advanced manufacturing technologies, this study follows the argument by
Chatterjee et al. [21]: To successfully implement a complex technology, which affects multiple
organizational entities, the needed intensity of interactions and collaborations among the managers
of these entities is a critical factor in the adoption of advanced manufacturing technologies. Thus,
it is expected that a decentralized organizational structure with flatter decision structures will be
associated with the adoption of new technologies. Based on these established measures this indicator
is operationalized as:
• The company decision making is highly concentrated at top management levels.
• The company extensively utilizes cross-functional work teams for managing the day to
day operations.
• The company has reduced the formal organizational structure to integrate operations more fully.

Hypothesis 9 (H9). The more decentralized the organization, the more likely the advanced manufacturing
technologies will be adopted.

4.4. Specific Technological Factors

4.4.1. Market Transparency for Advanced Manufacturing Technologies

Market transparency refers to the availability of information and solutions to implement
the technologies. It is reflected in governmental efforts to promote information, establish
public-partnerships, and establish measures to compare technologies solutions of different provides.
A highly fragmented market, with various isolated solution providers, with every one having its
standard, implies an immature industry.
Thus, market transparency is a proxy for technological maturity. Small and medium-sized
companies are more likely to adopt mature Industry 4.0 technologies than an immature one. The study
by Wischmann et al. [12] also highlights that a lack of user-transparency, technological standards, and
availability of solutions are severed obstacles for small and medium-sized enterprises. Based on this
argument, the following indicators are proposed:
• Information about products and services on self-adaptive technologies and digitalized processes
are widely available.
• The market for self-adaptive technologies and digitalized processes is transparent concerning
product and service features.
• The market for self-adaptive technologies and digitalized processes is transparent concerning
product and service costs.
Sustainability 2019, 11, 5807 9 of 13

• Information on standards and protocols for self-adaptive technologies and digitalized processes is
widely available.

Hypothesis 10 (H10). The higher the market transparency, the more likely advanced manufacturing technologies
will be adopted.

4.4.2. Security Concerns of Advanced Manufacturing Technologies

Cyber-physical systems and its digital integration along the business function share are a unique
feature with e-business security concerns. Firms conducting Internet-based e-business have less control
over data as in legacy systems. Also, the integration along the value chain implies the diffusion of
core corporate data, and even if its access restricted, its several physical access points for fraud usage
as increased.
These security concerns are even more prevalent in the context of self-regulating factories.
According to Bauer et al. [2], information security based on confidentiality, integrity, and availability is
a prerequisite or even the decisive factor in adopting Industry 4.0 technologies. Based on established
measures by Zhu et al. [40], this indicator is operationalized as:

• The company is very concerned about the security and privacy of data and transactions using
self-adaptive technologies and digitalized processes.
• Our trading partners are very concerned about the security of data and privacy using self-adaptive
technologies and digitalized processes.

Hypothesis 11 (H11). The higher the security concerns, the less likely advanced manufacturing technologies
will be adopted.

4.5. Dependent Variable

Advanced manufacturing technologies are currently in its evaluation stage for scale based
industrial applications, and many public-private initiatives have just recently been planned or have
just been set up to promote prototypes and technology champions [41]. Thus, it is way too early to
investigate general adoption stages.
Therefore, this study follows first the approach by Tsai et al. [42] and investigates the general
intention to adopt advanced manufacturing strategies and subsequently includes only the early stages
of technology assimilation based on the Guttman scale in Fichman and Kemerer [23]. On a five-point
Likert scale ranging from strongly agree to disagree the intention to adopt is measured according to
Tsai et al. [42]:

• The company is seriously contemplating to adopt self-adaptive technologies and digitalized

processes within one to three years from now.
• It is critical for the company to adopt self-adaptive technologies and digitalized processes within
one to three years from now.
• My firm is likely to adopt self-adaptive technologies and digitalized processes within one to three
years from now.

5. Results
A survey has been sent out to 38 selected manufacturing SMEs in Japan according to the relative
representation. The descriptives of the firms are presented in Table 1. The company sizes range
between 10 (12 firms), 50 (13 firms), 100 (eight firms), and more than 200 employees (five firms).
Sustainability 2019, 11, 5807 10 of 13

Table 1. Manufacturing Industries.

Industry Number of Firms

Automated Equipment and Robots 2
Basic Metals 2
Computer, Electronics and Optical Products 4
Control Equipment 2
Electrical Equipment 4
Fabricated Metal Products 1
Machinery and Equipment 9
Motor vehicles, trailers, and semi-trailers 1
Non-metallic mineral products 1
Transport Equipment 1
Paper Products 1
Pipes and Pumps 1
Mold Manufacturing 1
Precision Manufacturing 5
Other Manufacturing 3

The survey has been translated to Japanese and back to English to ensure semantic consistency.
The survey consists of the statements described in the previous section, and the interviewees indicated
to which extent, on a five-point Likert scale, they agree or disagree with each statement.
The model is evaluated for reliability, convergent validity, and discriminant validity. The Construct
reliability is assessed by computing Cronbach’s alpha. Cronbach’s alpha is a measure to check the
internal consistency of a construct based on the average correlations between the construct items
(Table 2). Cronbach’s alpha should be above 0.7. If the Cronbach’s alpha value is below 0.7, this is an
indicator that the items measure different concepts, or the items are not understandable/are ambiguous.
Therefore, only the constructs Complexity, Compatibility, Relative Advantage, Market Uncertainty, Top
Management Support, Market Transparency, and the dependent variables are considered. Based on
the remaining constructs a principal component analysis (correlation matrix, varimax) is used to assess
the convergent and discriminant validity. The Compatibility construct had to be dropped because of
too many over-loadings and insignificancy (loading > 0.5).
The remaining five components explain 72% of the variance and have significant loadings in their
respective parts and are uncorrelated across the components. Heteroskedasticity, the variance of the
error term, has been tested with the Breusch-Pagan/Cook-Weisberg, yielding a chi2 = 0.18. This means
that the variance of the error terms does not change with the observations.
After the determinants have been validated, the regression analysis is performed on the adjusted
model. A linear regression analysis is performed for the three scenarios of short-term (one year),
medium-term (two years), and long-term (three years) adoption intention.

Table 2. Cronbach’s Alpha.

Technology Adoption Construct Cronbach’s Alpha

Relative Advantage 0.86
Complexity 0.74
Compatibility 0.79
Cost 0.64
Top Management Support and Championship 0.79
Satisfaction with Existing Systems 0.5
Organizational Structure 0.82
Market Uncertainty 0.69
Industry Cluster 0.34
Market Transparency 0.88
Security Concerns 0.67
Sustainability 2019, 11, 5807 11 of 13

The final regression model is shown in Figure 2. The regression shows that Market Uncertainty
(of the company’s business) is a significant driver for adoption intention in the short, medium, and
long-term. Also, while the Relative Advantage matters in the short-term, strong indicators for adoption
intention in the long-term are Top Management Support of a company. No support has been identified
for the other constructs. This indicates that the adoption of advanced or smart manufacturing for SMEs
is market-driven, whether there is a strong need to change and build a strong relative competitive
advantage or not. This is facilitated in the long-term by the top management. Therefore, this study
highlights that the adoption of Industry 4.0 technologies and processes is primarily driven by external
factors and2019,
Sustainability less11,
byxinternal
FOR PEERdrivers.
REVIEWThis is aligned with the results obtained in [43], where the authors
11 of 13
highlight that Industry 4.0 in SMEs is typically related to Cloud Computing to improve operational
Cloud Computing
efficiency and only toto aimprove operational
smaller degree efficiency
used in and cases
real business only for
to adigital
smaller degree used in real
transformation.
business cases for digital transformation.

Figure 2.
Figure Theresulting
2. The resulting Industry
Industry 4.0
4.0 Adoption
Adoption Model.
Model. NS=
NS=NoNosupport.
support. The
Thenumber
numberin
inbrackets
brackets shows
shows
the beta
the beta coefficients
coefficients for
for one,
one, two,
two, and
and three
three years
years adoption
adoption levels.
levels.

The consequences of external pressure as the main driver has advantages and disadvantages.
The consequences of external pressure as the main driver has advantages and disadvantages.
Especially for small and medium-sized enterprises, it could lead to late adoption of Industry 4.0,
Especially for small and medium-sized enterprises, it could lead to late adoption of Industry 4.0,
because compared to mass markets catered by large enterprises, niche markets are less competitive.
because compared to mass markets catered by large enterprises, niche markets are less competitive.
Thus, external pressure signals could be misinterpreted or necessary technology adoption could be
Thus, external pressure signals could be misinterpreted or necessary technology adoption could be
deferred. However Industry 4.0 standards and protocols have not reached a unified maturity level,
deferred. However Industry 4.0 standards and protocols have not reached a unified maturity level,
thus being a late adopter could refrain SMEs to tap into additional costly investments. Especially in
thus being a late adopter could refrain SMEs to tap into additional costly investments. Especially in
the light of interoperability challenges [44] and unsolved cyber-security concerns [45], late adoption
the light of interoperability challenges [44] and unsolved cyber-security concerns [45], late adoption
for SMEs might be beneficial.
for SMEs might be beneficial.
Funding: This research was partially funded by Japan Society for the Promotion of Science (PE15003).
Funding: This research was partially funded by Japan Society for the Promotion of Science (PE15003).
Acknowledgments: The author would like to express his gratitude to Motohashi Kazuyuki for advising and
Acknowledgments:
hosting the author atThe hisauthor would
institute. Thelike to express
author would his likegratitude to his
to express Motohashi Kazuyuki
appreciation for advising
and thanks to the and
two
anonymous
hosting refereesatwho
the author his have beenThe
institute. a tremendous help like
author would to improve the article.
to express his appreciation and thanks to the two
anonymous
Conflicts of referees
Interest:who
The have
authorbeen a tremendous
declares help
no conflict to improve the article.
of interest.
Conflict of Interest: The author declares no conflict of interest.
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