The Role of Leader and the Effect of Customer’s Smart Factory Investment on Firm’s Industry 4.0 Technology Adoption in Thailand

Manufacturers are aware of Industry 4.0 trends due to the new technologies and the transformation of processes that require new competencies of employees and an integrated system in the supply chain network. The purpose of this paper is to examine the role of a leader through a transformational leadership style and the effect of a customer’s smart factory investment on a firm’s Industry 4.0 technology adoption in the Thai manufacturing industry. In total, 125 valid samples from different companies surveyed in the Thai manufacturing industry were used to analyze the mentioned relations. The multiple regression results show that a leader’s transformational leadership and external pressure, such as a customer’s smart factory investment, have positive impacts on a firm’s operational technology (OT) and information technology (IT) adoptions. These results reveal that successful technology implementation requires both internal and external factors to push for organizational change.

Effect of customer’s smart factory investment; Industry 4.0; Technology adoption; Transformational leadership;

        Industry 4.0 or the smart factory is an industrial revolution that challenges manufacturing companies. Operational technology (OT) and information technology (IT) are converging by using the Internet of Things (IoT), cyber-physical systems (CPS), big data, and analytical, artificially intelligence, cloud computing, and autonomous robots (Schumacher et al., 2016; Fatorachian and Kazemi, 2018; Berawi, 2020). These advanced technologies are transforming products, processes, and business models to form new industrial patterns. The development results of the fourth industrial revolution are not only the new technologies but also a new entrepreneurial mindset (Sterev, 2017). For this reason, business leaders play an essential role in developing and motivating their individual followers by determining and setting clear missions and visions (Wang and Howell, 2012; Cinnio?lu, 2020). Top management strategies pose significant challenges to managing employees to change their behaviors and adopt new technologies (Ihua, 2009). Various research studies on the modern leadership theory have explored the distinct attributes of a leader who has a transformational leadership style as an agent of change (Yu et al., 2002; Hallinger, 2003; Bass and Riggio, 2006). Thus, it is essential to study how transformational  leadership affects Industry 4.0 technology adoption.

While large-sized companies are very flexible in their investments to upgrade their technologies toward Industry 4.0, small- and medium-sized companies (SMEs) have limited budgets, knowledge, and expertise. These barriers faced by SMEs bring a low level of Industry 4.0 technology implementation in their enterprises. Nguyen’s (2009) study about the impacts of internal and external forces on IT adoption shows that customer pressure positively affects the IT adoption of manufacturers, especially SMEs. Similarly, Intalar and Jeenanunta’s (2019) research has confirmed the positive influence of a customer’s information and communication technology (ICT) investment on a supplier’s ICT adoption. Thus, this study includes the effect of a customer’s smart factory investment as another empirical factor.

The key research question addressed in this study includes an analysis testing of the impact of transformational leadership and the effect of a customer’s smart factory investment on a firm’s OT/IT adoption. The rest of this paper is organized as follows: The theoretical background and the hypotheses are presented in Section 2. The hypothesis model is empirically tested in Section 3, and the results are discussed in Section 4. Finally, the conclusions are drawn in Section 5. 

    The main purpose of this paper is to investigate how transformational leadership (internal factor) and the effect of a customer’s smart factory investment (external factor) affect a firm’s OT and IT adoption. Successful technology adoption requires leaders to play an important role in designing the core technological values, purpose, and vision by creating policies, strategies, and structures that will guide their organizations toward successful technology integration and implementation. Additionally, there is strong evidence that when customers invest in new technologies related to Industry 4.0, this will affect their suppliers’ Industry 4.0 technology adoption. The same level of technology aims to reduce coordination failures between manufacturers and their suppliers. Therefore, the top management executives (CEOs) should have a vision toward Industry 4.0 or a smart factory to lead their firms to achieve digital transformation. Moreover, the firms need to establish strong relationships and collaboration with their customers to learn how to improve their OT/IT systems and create automation in the production process. The higher level of automation in manufacturing processes aims to reduce the manufacturing lead time, increase productivity, and enhance product quality.

        This study has not examined other internal and external dimensions. Further research could link other leadership theories (such as those involving leadership skills, leadership behavior, and agile leadership etc.) with a firm’s technology adoption to analyze the former’s influence on the latter. Researchers could also include other external factors, such as the government’s Industry 4.0 policy, which supports manufacturers in collaborating with an external organization (e.g., a government labor training institution and a university) to upgrade a technology and upskill/reskill employees. It is also important to determine the appropriate strategic to enhance the success of Industry 4.0 technology in each business size in Thailand. Thus, further studies should test the initial hypothesis to investigate the effects of the leadership style and customer investment on a firm’s technology adoption in the different contexts of the business size, the leader’s gender, and the leader’s nation. Furthermore, this study has conducted a narrow analysis. Future research should apply a non-linear regression method to investigate the effects of transformational leadership and a customer’s smart factory investment on a firm’s Industry 4.0 technology adoption.

    This research was fully supported by the Center of Excellence in Logistics and Supply Chain Systems Engineering and Technology (COE LogEn), Sirindhorn International Institute of Technology, Thammasat University.

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