Diffusion of Industry 4.
0 in Manufacturing Sector - An
Innovative Framework
Nitin Sachdeva1, Rajat Kumar Obheroi2, Abhishek Srivastava3, Nehal SK4
1
Institute of Management Technology (IMT), Ghaziabad, UP, India
2,3,4
Amity School of Engineering and Technology, Noida, U.P., India
1
nitin.sach@gmail.com, 2ron.rajat@gmail.com, 3asrivastava8@amity.edu, 4nehal.sk.99@gmail.com
Abstract: With new technologies emerging out in the
manufacturing sector everyday moving away from the
traditionally adopted mechanical systems to one of the most
sophisticated and automated assembly lines of today. To
meet and adopt to the dynamic customer requirements,
fourth generation of industrial manufacturing governed by
smart systems and web based solutions called industry 4.0 is
considered to be the technology for the future. The two prime
distinguishing features of Industry 4.0 involves digitization
by use of cyber-physical systems and manufacturing units
enabled with human like intelligence based on the concept
of "internet of things". This research work proposes a
framework to help identify various enablers of industry 4.0
adoption in European manufacturing companies; design
and test a model under the premises of the theories of
Diffusion of Innovation and Organizational Diffusion of
Innovation for improving our knowledge and understanding
about the adoption of industry 4.0 in future amongst the
European manufacturers; and, to explain the effect of
industry 4.0 adoption on the performance of a
manufacturing company.
Keywords: Industry 4.0, Smart Systems, Internet-based
solutions, diffusion of innovation (DOI), organizational
diffusion of innovation (ODI)
I. INTRODUCTION
A. Industry 4.0
Mechanization, electricity and information technology
(IT) were brought to human manufacturing by the first
three industrial revolutions. Germany represents the
highest standards in manufacturing throughout the world
and is home to the most advanced manufacturing
factories and companies [23]. Moreover, the federal
government in Germany assigns most its R&D funds to
industrial development, which enables industrial technology to
progress emormously. The Labor forces are being replace
by passive machines and robots, which means they are
controlled by a human without consciousness. The statistics
from 2012 show that there were about 273 industrial
robots per 1000 human workers in Germany [5]. The
978-1-5386-0514-1/17/$31.00 ©2017 IEEE
process remains expensive however, due the additional
costs incurred from the need for employees and
resources dedicated to the controlling, checking and
efficient maintenance of the sophisticated machinery.
Recently, taking advantage from the Cyber-Physical System
(CPS) and Internet of things (IOT), the industry-relevant
materials, for example, machines, products, sensors,
customers, the entire supply chain, are capable of being
connected in order to trade useful information and thereby
look after actions with each other autonomously and
independently. German engineers realize that manufacturing
has been developed into a new paradigm shift, also known as
µIndustry 4.0¶, to ensure that products are able to control their
entire manufacturing process [18]. With this emerged, the
most popular manufacturing topic of both practitioners and
researchers in the world, industry 4.0, synonymously
considered to be the fourth industrial revolution with largest
effect on the manufacturing sector in times to come [13].
During this same time, many countries with industrial
ambitions have taken note of the fourth industrial
revolution. China published an industrial development
plan in 2015, it was called 'Made in China 2025'. Also, a
similar industry developing plan has been made for the same
motives as the Industry 4.0 [30]. In this section, the future
manufacturing vision, the system architecture, and the ongoing
industry examples are displayed, according to many various
researchers¶ research and opinions, to conclude the main
concepts of Industry 4.0.
B. The Vision and concept of Industry 4.0
Among top researchers from across different countries have
shown a fundamental consensus that the revising industrial
processes requires a long development duration and must
consider following four characteristics as vision for the future
manufacturing processes:
1). Factory ± Future factory, under industry 4.0, is proposed
to be a well knitted manufacturing unit wherein not only
all manufacturing resources would be connected to
exchange information automatically, but also possess
human like conscious and intelligence to forecast resource
 maintenance, control production process and manage the
entire factory system. In addition, many manufacturing
processes, such as product design, production planning &
engineering and services, are going to be simulated as
modular, and then connected closely end-to-end, which
means these processes are not only commanded by a
decentralized system but also controlled interdependently.
This kind of future factory is known as a Smart Factory
[22].
2). Business - Industry 4.0 phenomenon presents an
integrated communication network between various
manufacturing resources along with supply chain links
like suppliers, manufacturing units, companies,
customers, logistics, resources etc. The idea is to ensure
that every section optimizes their configuration in real-
time depending on the demands and status of associated
sections in the network, that makes the full profit for all
cooperatives with few sharing resources. This will lead to
a reduction in the costs, raw material, pollution, CO2
emissions, etc. In other words, each cooperating section
will influence the future business network, which could
achieve a self-control, self-managed system and transmit
live responses [13].
3). Products - Industry 4.0 will give rise to a new class of
product generated in manufacturing, called smart
products. These products would be embedded with
processors, identifiable components, and sensors which
contains instructions to convey important functionality
related guidance to the customers and in return provide
their usage feedback to the manufacturer through this
integrated system.
These elements, add further functionality to the
products, for example, tracking the products, measuring
the state of products or users, carrying this information,
and analyzing the results depending on the information.
In addition, this provides an opportunity to the product
developer to optimize the design, prediction and
maintenance by utilizing the product information log
embedded onto the product [24].
4). Customers. Customers will also avail a numerous of
advantages under Industry 4.0. A new purchasing method
is going to be provided to customers. It allows customers
to order whatever function of products, with any number
even if only one is. In addition, customers could change
their order and ideas at any time during production even
at the last minute with no charge. On the other hand, the
advantages from the smart product lets the customer not
only to know the production knowledge of the product but
also to receive the advice of utilization depending on their
own behaviors [28]. Besides all of these planned visions
of manufacturing, many researchers and companies have
been ulitising Industry 4.0 in several fields around these
concepts ([15], [26], [31], [34]).
II. BACKGROUND
For any manufacturing enterprise, the main sources of
sustainability, competitive advantages and performance
emerge from new technological and non-technological
innovation adoption [25]. Manufacturing enterprises are under
constant pressure to seize competitive advantage and
sustainability to address the challenges arising from increasing
costs of production, changes in input prices, globalization and
changes in customer preferences [1].
With new technologies emerging out in the manufacturing
sector everyday moving away from the traditionally adopted
mechanical systems to one of the most sophisticated and
automated assembly lines of today. To meet and adopt to the
dynamic customer requirements, fourth generation of
industrial manufacturing governed by web based solutions and
smart systems called industry 4.0 is considered to be the
technology for the future. The two prime distinguishing
features of Industry 4.0 involves digitization by use of cyber-
physical systems and manufacturing units enabled with human
like intelligence based on the concept of "internet of things".
In countries like German or other alike European country,
Industry 4.0 could potentially result in increased international
competitiveness, enhanced production flexibility, a higher
adaptation to customers¶ requirements, consideration for
changing demography and conceptually new business models
[6].
The true significance of Industry 4.0 is quite evident to the
readers today. However, at the very same time the question
that arises is that to what qualifications companies require in
order to adopt industry 4.0 and become an active part in this
revolutionary development? In other words, what are the
various enablers that would affect the adoption of industry 4.0
by the European manufacturing companies?
III. RESEARCH OBJECTIVES & HYPOTHESIS
The proposed research framework dwells in to understanding
and examining various enablers that possibly play a vital role
in the diffusion of µIndustry 4.0¶ in the manufacturing sector
of Europe and analyze how its adoption will affect the
performance of European manufacturing companies in the
next 10 years.
Objectives
1. To identify various enablers of Industry 4.0 adoption in
European manufacturing companies.
2. To design and test a model under the premises of the
theories of Diffusion of Innovation and Organizational
Diffusion of Innovation for improving our knowledge and
 understanding about the adoption of industry 4.0 in future The literature on innovation adoption has emphasized
amongst the European manufacturers. manufacturing enterprise capacities, representing the unique
ability of every organization to adopt and implement
3. To explain the effect of industry 4.0 adoption on the innovation. It is crucial for enterprises to pursue technological
performance of a manufacturing company and non-technological innovations simultaneously, which
raises the issue of µtypes of innovation¶. Types of innovation
A. Research Questions and Hypothesis differentiate based on the object of innovation adoption, i.e.
Literature on innovation adoption provides enough empirical product, process, service, market and organizational
evidence of the effect of persuasion on innovation over a innovations [29].
broad range of innovation adoption studies ([4], [14], [19], [7],
Despite the classifications noted above, in which innovations
[10]). The diffusion of innovation and organizational diffusion
and the effects of innovations are categorized in particular
of innovation theories, together with earlier empirical studies,
terms, studies have also reported high levels of inter-
have emphasize the prospect of comprehending the economic
dependence between types of innovation. Walker [32], in a
benefit, together with the ability to observe these benefits, the
study of public organizations, reported that organizational,
ability to try, and the capacity to adopt new concepts and/or
marketing and service innovations were interdependent,
process the effects on potential adopters. Based on the
whereas Li et al. [21] showed us that process and product
premises of the DOI and ODI theories, together with the
innovations were significantly interrelated with each other.
empirical findings, the first hypothesis makes the following
Achieving superior performance therefore required the
prediction: adoption of a portfolio of different types of innovations,
enabling enterprises to address uncertainty and changes in the
Hypothesis 1: Persuasion of innovation has a positive effect
competitive global business environment ([8], [2]). Earlier
on industry 4.0 adoption among European manufacturing
empirical studies reported positive effects of innovation on
companies
enterprise performance ([11], [8], [12], [2]). In agreement with
The manner in which an enterprise responds to business the earlier studies, the fourth hypothesis, therefore, makes the
challenges largely depends on its strategic orientation, which following prediction:
aligns internal capacity with external environmental factors.
Several studies in the recent past have investigated the effect Hypothesis 4: Industry 4.0 adoption has a significant,
of strategic orientation and have found positive effects on an positive effect on the performance of European
innovation and/or performance of an organization ([3], [17], manufacturing companies
[16], [9]). Because earlier studies reported positive effects of
The proposed research plans to make some other predictions
each component of strategic orientation on adoption of an
in light of the findings of the earlier studies. There hypothesis,
innovation, the second hypothesis, therefore, makes the
therefore, makes the following predictions:
following prediction:
Hypothesis 5: Industry 4.0 adoption positively mediates the
Hypothesis 2: Strategic orientation has a positive effect on
relationship between innovation persuasion and
industry 4.0 adoption among European manufacturing
performance of European manufacturing companies
companies
Hypothesis 6: Innovation adoption positively mediates the
Firm characteristics refer to firm antecedents associated with
relationship between the strategic orientation and
innovation among manufacturing enterprises. Rogers [27]
performance of European manufacturing companies
reported that most enterprises face many problems; therefore,
they continuously scan for innovations that match their
relevant problems. Small enterprises are innovative, and they
are less bureaucratic and risk averse than their large
counterparts; nevertheless, they lack critical resources and
experience. Studies focusing on firm antecedents also referred
to as internal drivers have reported positive effects on
innovation adoption among Small and Medium Enterprises
(SMEs) ([20], [33]). Based on the premises of the DOI and
ODI theories and the findings of empirical studies, the third
hypothesis, therefore, makes the following prediction:

Hypothesis 3: Firm characteristics have positive effects on

industry 4.0 adoption among European manufacturing
companies

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Fig. 1. Research Framework For Industry 4.0 Adoption
Hypothesis 7: Innovation adoption positively mediates the
relationship between the firm characteristics and
performance of European manufacturing companies
I. PROPOSED RESEARCH METHODOLOGY
The proposed research shall make use of cross-sectional
design and collect quantitative data through structured
interview with manufacturing companies in Europe. The
appropriate sampling framework for this study would consist
of the European Manufacturing Enterprises listed on authentic
government websites. The population sample would possibly
be manufacturing enterprise owners (in case of SMEs) and top
level managers in larger manufacturing enterprises. An
appropriate sample size would be chosen based on how
effectively path analysis requirement of sample data is met.
A. Research Instrument
A questionnaire will be drafted using plain and unbiased
wording, so that respondents can easily understand the queries
and could give feedback based on their perceptions. The
questions can be taken from earlier/similar studies with
needed modifications where needed. A Likert scale of seven
points shall be utilized for the independent, mediating and
dependent variables.
B. Proposed Analysis
To start with it¶s important to test the validity and reliability of
all the items in the questionnaire. Once the validity and
reliability is analyzed, the idea is to build hierarchical
component models. After exploring the finding using
descriptive analysis and testing the validity, reliability and
effects of first order constructs on hierarchical component
models using the repeated indicators approach, through this
study the idea is to examine the effects of persuasion, strategic
orientation and firm characteristics on industry 4.0 adoption
and overall enterprise performance with path analysis using
Structural Equation Modeling technique, using the repeated
indicators approach, to estimate the higher order constructs.
IV. CONCLUSION
The proposed research framework dwells in to understanding
and examining various enablers that possibly play a vital role
in the diffusion of µIndustry 4.0¶ in the manufacturing sector
of Europe and analyze how its adoption will affect the
performance of European manufacturing companies in the
next 10 years. The proposed framework helps identify various
enablers of Industry 4.0 adoption in European manufacturing
companies along with presenting a methodology to design and
test a model under the premises of the theories of Diffusion of
Innovation and Organizational Diffusion of Innovation for
adoption of industry 4.0 in future amongst the European
manufacturers. Further, the proposed framework is capable to
explain the effect of industry 4.0 adoption on the
performance of a manufacturing company
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