Insights into the digitalization-performance relationship: the role of flexibility and quality enhancing organizational practices

Abstract

Although still in its early stages for the average manufacturing firm, the adoption of digital technologies has arrived in production systems. In response to these changes, firms are transforming their production systems and processes to accommodate this trend towards digitalization, constituting Industry 4.0. To make change effective, manufacturing firms are implementing advance production technologies and complement these with the necessary organizational changes in the production processes. Building on the premises of diffusion of innovation theory, the resource-based view and socio-technical systems theory, the present study examines whether the relation between the implementation of digital technologies and flexibility- and quality-enhancing organizational practices have a direct and moderating effect on the operational efficiency of manufacturing firms. The data come from a questionnaire-survey among 502 Spanish and Dutch organizations that responded to the European Manufacturing Survey in 2015 and 2018. Using a concatenated and multi-country dataset, the results reveal that both digitalization and organizational practices affect operational efficiency positively, but the impacts are mostly on different efficiencies, i.e. digitalization results in more efficiency regarding quality aspects (scrap rate, quality complaints), while organizational practices impact lead time and not-on-time-delivery efficiencies, and quality complaints. Both technologies and flexibility- and quality-enhancing organizational practices are seemingly needed, and sometimes even complement each other, but they do not provide synergy effects in combination. Last, early adoption of the digital technologies can help to further improve operational efficiencies.