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How smart is a ‘smart factory’?: an organizational view

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  • Sunghoon Chung
  • Minho Kim

Abstract

This paper investigates the game-changing paradigm in modern manufacturing, known as the “smart factory,” from an organizational perspective. Factories get smarter—or smartized—by becoming more data-intensive and more tightly integrating operations with management. We design a unique survey to measure this intangible organizational capital accumulation process for 939 Korean manufacturing plants. Observing heterogeneous levels of smartization across factories, we explore their relationship with three performance dimensions: productivity, cost efficiency, and product variety. The drivers of smartization are also identified. Our analysis uncovers a strong association between smartization and heightened productivity, with varying interactions with other performance metrics based on the specific manufacturing process (e.g., lower defect rate only in assembly line process). Importantly, we find that investments in digital technologies drive smartization only when complemented by structured incentive management and proper chief executive officer (CEO) leadership.

Suggested Citation

  • Sunghoon Chung & Minho Kim, 2024. "How smart is a ‘smart factory’?: an organizational view," Industrial and Corporate Change, Oxford University Press and the Associazione ICC, vol. 33(5), pages 1199-1230.
  • Handle: RePEc:oup:indcch:v:33:y:2024:i:5:p:1199-1230.
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    File URL: http://hdl.handle.net/10.1093/icc/dtad070
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