Received: 14 August 2021 Revised: 17 December 2021 Accepted: 1 January 2022

DOI: 10.1002/bse.2989

RESEARCH ARTICLE

Linking stakeholder and competitive pressure to Industry 4.0

and performance: Mediating effect of environmental
commitment and green process innovation

Manjot Singh Bhatia1 | Saurabh Kumar2

1
School of Strategy and Leadership, Coventry
University, Coventry, UK Abstract
2
Information Systems Area, Indian Institute of In the recent few years, with an increase in focus on sustainability, firms have been
Management Indore, Indore, India
actively pursuing different strategies to contribute towards sustainability. Industry
Correspondence 4.0 (I4) technologies can help organizations to achieve superior environmental as well
Manjot Singh Bhatia, School of Strategy and
as economic performance. Through the lens of stakeholder theory (ST) and
Leadership, Coventry University, Coventry,
UK. Schumpeterian view of competition (SCV), this paper examines whether stakeholder
Email: [email protected]
and competitive pressures towards sustainability stimulate organizations to imple-
ment I4 technologies and commensurate performance outcomes. The study further
tests the mediating role of environmental commitment and green process innovation
(GPI) on these relationships. The proposed hypotheses are examined using the survey
data from 173 manufacturing firms in India by partial least squares (PLS) approach.
Findings show that environmental commitment mediates the effect of stakeholder
and competitive pressures on I4 technologies. Further, results also show that GPI
mediates between I4 technologies and performance. The findings provide insights for
managers on how they can best respond to stakeholder and competitive pressures
on sustainability and contribute towards sustainable development.

KEYWORDS
competitive pressure, environmental commitment, environmental performance, Industry 4.0,
stakeholder pressure, sustainability

1 | I N T RO DU CT I O N et al., 2016; Shamsuzzoha et al., 2016). This necessitates digitization,

automation, connectivity, and integration of manufacturing systems
Today, the manufacturing environment has become very complex and and enterprises (Fatorachian & Kazemi, 2018). At the same time, with
dynamic (Genovese et al., 2014). There are several aspects such as an increased focus on sustainable development, firms have also been
agility, responsiveness, product quality, and compliance with regula- facing pressures from several stakeholders, such as the government,
tions, which are crucial for firms for their survival in the market customers, and so forth, regarding the implementation of environment
(Brousell et al., 2014). Further, the ever-changing requirements of cus- management practices (Luo et al., 2020). Besides pressure from stake-
tomers have posed significant challenges for organizations. To over- holders, firms also face significant competitive pressure for
come these challenges and satisfy the customer requirements, firms implementing environment management practices (Dai et al., 2015).
need to ensure better flexibility to offer customized products with Industry 4.0 (I4) technologies can ensure digitization, connectivity,
better quality and at competitive prices in the market (Leit~
ao and integration of production systems (Naqvi et al., 2015) and help in

This is an open access article under the terms of the Creative Commons Attribution License, which permits use, distribution and reproduction in any medium,
provided the original work is properly cited.
© 2022 The Authors. Business Strategy and The Environment published by ERP Environment and John Wiley & Sons Ltd.

Bus Strat Env. 2022;31:1905–1918. wileyonlinelibrary.com/journal/bse 1905

 10990836, 2022, 5, Downloaded from https://onlinelibrary.wiley.com/doi/10.1002/bse.2989 by Universidade De Coimbra, Wiley Online Library on [17/12/2024]. See the Terms and Conditions (https://onlinelibrary.wiley.com/terms-and-conditions) on Wiley Online Library for rules of use; OA articles are governed by the applicable Creative Commons License
1906 BHATIA AND KUMAR

better managing the systems and satisfy the demands of the cus- tested this relationship empirically and found that I4 positively affects
tomers. “Industry 4.0,” as defined by Kohler and Weisz (2016), is “a economic and environmental performance. However, few researchers
new approach for controlling production processes by providing have also pointed out the negative effects of I4 with respect to
real-time synchronization of flows and by enabling the unitary and product performance (Dalenogare et al., 2018) and economic/
customized fabrication of products.” I4 comprises several advanced environmental performance (Kiel et al., 2017). Therefore, more studies
technologies such as cloud computing, cyber-physical systems (CPS), are required for reaching a conclusive agreement with regard to the
Internet of things (IoT), additive manufacturing, big data analytics potential outcomes of I4 technologies. Further, to achieve sustainabil-
(BDA), and so forth (Kamble et al., 2020; Lu, 2017). I4 technologies ity outcomes, firms also need to leverage digital technologies to pro-
can create an environment in which processes can self-organize and mote green process innovation (GPI). GPI involves modifications and
self-optimize based on specific criteria such as customers' demand, re-design of the production processes and aims to reduce any poten-
availability of resources, costs, and so forth (Leit~ao et al., 2016). tial negative effects on environment and reduce overall costs (Guo
Overall, I4 technologies aim to integrate the processes such that the et al., 2021; Wong et al., 2020). GPI practices can serve as a channel
production is efficient and flexible, and products are of higher quality through which firms can leverage I4 technologies for achieving the
and lower costs are incurred (Wang et al., 2016). The improved outcomes with regard to sustainability (Wei & Sun, 2021). Specifically,
decision-making resulting from I4 technologies leads to better I4 technologies can address several challenges related to collecting
productivity and enables firms to achieve competitive advantage in and processing data, thereby promoting GPI and achieving sustainabil-
the market (Bechtold et al., 2014). ity outcomes. However, the role of GPI between digital technologies
Besides the above mentioned benefits, I4 technologies can also and performance remains unexplored in the literature. Therefore, we
help organizations to achieve sustainable performance objectives fill this gap and analyze the effect of GPI between I4 and
(Machado et al., 2020; Stock & Seliger, 2016). As firms face pressures performance.
from stakeholders and competitive pressures towards sustainability, This paper has the following three objectives:
they can consider I4 technologies for ensuring sustainability outcomes
and survive and excel in the market. Earlier studies in literature have 1. Analyze the influence of stakeholder and competitive pressures on
examined the influence of stakeholder and competitive pressures I4 technologies
towards green supply chain management (GSCM) practices (Dai 2. Examine the mediating role of environment commitment between
et al., 2014; Yu & Ramanathan, 2015). Due to the potential benefits the effect of stakeholder and competitive pressures on I4
of I4 technologies with respect to sustainability, many firms have technologies
invested in these technologies in the recent few years (Chung, 2015). 3. Examine the mediating effect of GPI between I4 technologies and
However, the impact of stakeholder and competitive pressures performance
towards sustainability on I4 remains unexplored. We fill this gap in
the literature and examine stakeholder and competitive pressures as Section 2 provides theoretical support for the framework and
antecedents of I4 technologies. Specifically, based on the stakeholder subsequently proposes the hypotheses. In Section 3, methodology is
theory (ST) and Schumpeterian view of competition (SVC), the first discussed, while Section 4 presents findings. Managerial implications
objective is to analyze whether stakeholders and competitive pres- are provided in Section 5, and Section 6 presents conclusions and
sures towards sustainability influence firms to implement I4 future directions for research.
technologies.
The environmental management literature has also emphasized the
importance of environmental commitment to respond to environmental 2 | LI T E RA T U R E RE V I E W
issues (Jansson et al., 2017). Environmental commitment can be reg-
arded as a key internal factor, which can impact the actual response of 2.1 | Theoretical underpinnings
firms towards handling the increasing pressures towards sustainability
(Wang et al., 2018). Firms which commit themselves towards environ- ST has received increased attention in literature on sustainability (Dai
ment protection in response to increased pressures on sustainability et al., 2014; Sarkis et al., 2010). According to Freeman (1984), a stake-
are likely to implement environment management practices (Chen holder is “any group or individual who can affect or is affected by the
et al., 2015), including I4 technologies. In this regard, we consider envi- achievement of an organization's objectives.” Donaldson and
ronmental commitment as an important mediator between pressures Preston (1995) defined stakeholders as “persons or groups with legiti-
towards sustainability and I4 technologies. Thus, the second objective mate interests in procedural and/or substantive aspects of corporate
is to examine whether environmental commitment mediates the effect activity.” Stakeholders include external as well as internal stake-
of stakeholders and competitive pressures on I4. holders. Several researchers consider business to be “a coalition” of
Several researchers have discussed how I4 technologies can con- stakeholders, including government, employees, customers,
tribute towards sustainable development (Jabbour et al., 2018; shareholders, and so forth (Donaldson & Preston, 1995).
Kamble et al., 2018; Machado et al., 2020; Rosa et al., 2020). The The pressure exerted by stakeholders can significantly motivate
recent studies by Li et al. (2020) and Kumar and Bhatia (2021) have firms to implement environment management practices to perform
 10990836, 2022, 5, Downloaded from https://onlinelibrary.wiley.com/doi/10.1002/bse.2989 by Universidade De Coimbra, Wiley Online Library on [17/12/2024]. See the Terms and Conditions (https://onlinelibrary.wiley.com/terms-and-conditions) on Wiley Online Library for rules of use; OA articles are governed by the applicable Creative Commons License
BHATIA AND KUMAR 1907

better in the market (Delmas & Toffel, 2008; Sarkis et al., 2010). Dur- so that the stakeholders are satisfied (Deegan, 2002). For instance,
ing the past few years, stakeholders have become more concerned three NGOs filed petitions against Kudankulam nuclear plant in Tamil
about the issues related to environment, and therefore, firms are Nadu, India, regarding environmental issues related to the plant, and
under constant pressure from different stakeholders to implement the power plant has to comply with various environment management
practices that can contribute towards better environmental perfor- practices.i
mance (Geng et al., 2017; Hofer et al., 2012; Klassen, 1993). When Several empirical studies have also examined the effect of stake-
firms heed to demands of stakeholders and cooperate with them, it holder pressure on environment practices (Delmas & Toffel, 2008;
can result in a win-win situation (King, 2007). Many studies have Wu & Ramanathan, 2015). Recently, few studies have also found that
empirically tested the effect of stakeholder pressure on environment I4 technologies can improve environmental performance (Kumar &
management practices (Dai et al., 2014; Darnall et al., 2010). In line Bhatia, 2021; Li et al., 2020). Therefore, to contribute towards sus-
with these studies, our proposed model is grounded on ST, which pos- tainability and satisfy the various stakeholders' expectations, firms
tulates that firms should understand and respond to pressures exerted can implement I4 technologies. In the recent few years, several firms
by stakeholders in developing the strategies related to environment have made considerable investments and adopted I4 technologies.
protection and gain competitive advantage. Specifically, we expect Through the implementation of I4 technologies, they can contribute
that stakeholders' pressures can influence the implementation of I4 to the protection of environment and satisfy stakeholders pressure
technologies, which can lead to sustainability outcomes. towards sustainability. For instance, United Nations Industrial
Furthermore, we integrate the SVC as a theoretical grounding to Development Organization (UNIDO) in its report of 2017 has
examine how competitive pressure can influence firms to implement examined the role of stakeholders in implementing I4 technologies.ii
I4 technologies. SVC is built on the argument that specific actions of Thus, we postulate:
competitors' prompt competitive responses from the focal firm
(Schumpeter, 1942). SVC has been used in earlier studies to clarify Hypothesis H1. Stakeholder pressure positively affects
how and why organizations respond to rival firms or competitors adoption of I4 technologies.
(Young et al., 1996). Although SVC is suitable for examining the
engagement of a firm towards adopting I4 technologies in achieving
superior environmental performance, it has received minimal consid- 2.2.2 | Competitive pressure and I4
eration in sustainability literature. Earlier, SVC has been used in the
context of sustainability by Hofer et al. (2012) and Dai et al. (2014). A key element for a firm to survive and excel in the market is to
Using Schumpeterian economics insights, we argue that competitive closely observe the activities and strategies adopted by its competi-
pressure towards sustainability can influence organizations towards tors (Narver & Slater, 1990). In accordance with the SCV, organiza-
the adoption of I4 technologies. Thus, our proposed framework com- tions can improve their place in market through appropriate internal
bines both ST and SVC and argues that stakeholder and competitive and external activities (Jacobson, 1992). Firms are generally inclined
pressures influence firms to consider adopting I4 technologies to to emulate the behavior or actions of other firms in their social net-
achieve superior outcomes with regard to sustainability. work (Henisz & Delios, 2001). Organizations generally follow their
competitors in the market, who could achieve success by following
certain specific actions. Over the time, it has been observed that
2.2 | Hypotheses development taking appropriate actions at a suitable time can help firms to gain
competitive advantage (Jacobson, 1992). As sustainability has gained
2.2.1 | Stakeholder pressure and I4 increased attention during the last few years, activities related to envi-
ronmental management can certainly help firms to achieve competi-
According to the ST, the pressure from stakeholders can influence tive advantage (Hart, 1995). According to Bergh (2002), firms are
organizations to consider issues related to the environment and imple- strongly influenced by their competitors regarding their response
ment environment management (Sarkis et al., 2011). Firstly, stake- related to environmental practices. In these lines, UNIDO promotes
holders in a supply chain can influence a firm's decision towards Inclusive and Sustainable Industrial Development through three
environment management practices (Sarkis et al., 2010). Another programmatic fields of activity, namely, advancing competitiveness
stakeholder who can influence firms in this direction is Government, among organizations, creating shared prosperity, and safeguarding the
which can exert pressure through regulations (Zhu & Sarkis, 2007). environment (see footnote ii).
Firms that do not conform to these regulations may even face fines or Several studies have found evidence that firms pay heed to
penalties (Sarkis et al., 2010). Pressures may also emerge from non- their competitors' environmental activities (Dai et al., 2014;
governmental organizations such as environmental societies like
NGOs, influencing firms' decision towards environmental practices
i
(Hoffman, 2000). These societies can influence the public's beliefs https://www.business-standard.com/article/companies/ngo-files-petition-against-
kudankulam-project-113071500903_1.html, accessed on 28-April-2021
against or in favor of a firm's approach to environment management ii
https://www.unido.org/sites/default/files/2017-08/REPORT_Accelerating_clean_energy_
(Benn et al., 2009). Therefore, firms should legitimize the performance through_Industry_4.0.Final_0.pdf, accessed on May 03, 2021
 10990836, 2022, 5, Downloaded from https://onlinelibrary.wiley.com/doi/10.1002/bse.2989 by Universidade De Coimbra, Wiley Online Library on [17/12/2024]. See the Terms and Conditions (https://onlinelibrary.wiley.com/terms-and-conditions) on Wiley Online Library for rules of use; OA articles are governed by the applicable Creative Commons License
1908 BHATIA AND KUMAR

Dai et al., 2015; Ye et al., 2013). On similar lines, due to the potential 2.2.4 | I4, GPI, and performance
of I4 technologies towards sustainability (Machado et al., 2020), sev-
eral firms have adopted I4 technologies in their operations. If a firm The digitization enabled by I4 technologies can create opportunities
does not adopt I4 technologies, but its competitors do adopt, it may for GPI by identification of sources of pollution (Wei & Sun, 2021).
not be able to achieve a competitive advantage and desired perfor- This can subsequently help firms to re-design their manufacturing pro-
mance with respect to sustainability outcomes. Therefore, firms may cesses for reducing pollution. For instance, digitization in manufactur-
implement I4 technologies in response to competitive pressure and ing settings can be achieved by installing and using different types of
ultimately contribute to sustainable development. In this regard, sensors. These sensors can provide useful information such as those
we posit: of machine usage, performance indicators, failure models, and exact
emission details. These data and information can prove to be helpful
Hypothesis H2. Competitive pressure positively affects for developing better processes. I4 technologies such as CPS and IoT
adoption of I4 technologies. result in effective integration of the manufacturing systems and
machinery through access to information on a real-time basis (Lopez
research, 2014). This enhanced integration and sharing of information
2.2.3 | Mediating effect of environmental can help streamline the manufacturing processes and help in making
commitment optimal decisions (Yan & Xue, 2007). BDA and IoT can build tools for
managing performance and systems for measurement, which can help
The responsiveness of the firms towards sustainability practices is energy and resource management processes (Helo & Hao, 2017; Li
affected by their commitment towards the environment. et al., 2016). Based on this discussion, we propose:
Environmental commitment is the extent to which the top
managers in an organization show their commitment to protecting Hypothesis H6. I4 is positively related to GPI.
the environment and subsequently implementing the relevant
practices (Jansson et al., 2017). The actions taken by organizations I4 technologies can play a significant role towards achieving supe-
that are related to environmental protection generally emanate rior environmental as well as economic performance. I4 technologies
from internal and external pressures in the organizations (Roy allow for higher integration between decision support systems and
et al., 2001). The organizations wish to retain their good manufacturing operations (Jung et al., 2017). This enhanced integra-
relationship with their stakeholders by heeding to their demands tion and sharing of information can help to streamline the operations
related to environment protection since such practices and and processes on the shop floor and make optimal decisions (Yan &
activities comply with the social norms and behaviors (Wang Xue, 2007). The effective exchange of information can be used as a
et al., 2018). strategic tool for enhancing the performance of manufacturing pro-
The pressures towards adopting sustainable practices can also cesses (Guo et al., 2014). This can impact the quality of products
influence management's commitment to implement sustainability ini- (Chen & Deng, 2015) and develop products through integration and
tiatives (Jiao et al., 2020). Firms with less commitment to protecting improved decisions (Lang et al., 2014). The digitization provided by I4
the environment are less likely to implement relevant sustainability technologies can support production, planning, and control of opera-
initiatives. On the other hand, the environmental commitment can tions, which can reduce overall costs and enhance the overall effi-
create a conducive atmosphere in the firm for implementing the ciency of the operations. I4 technologies can also provide firms with
practices which support the environmental strategies (Lee & several advantages on the environmental outcomes. The real-time
Ball, 2003). Therefore, the pressure towards sustainability and envi- information collected from other supply chain entities can help organi-
ronmental commitment can work together and influence the firms' zations to efficiently allocate the resources such as water, energy,
orientation towards environment management initiatives (Wang materials, and so forth (Chiarini, 2021; Jabbour et al., 2018; Stock &
et al., 2018). On these lines, we argue that in response to pressure Seliger, 2016). The information gathered through the use of digital
towards sustainability, environmental commitment will be a key technologies can be processed to gain relevant insights and control
mediating factor influencing firms to adopt I4 technologies. Thus, pollution, water quality, and energy efficiency by optimizing the pro-
we postulate: duction processes (Junior et al., 2018).

Hypothesis H3. Stakeholder pressure positively affects Hypothesis H7. I4 positively affects economic
environmental commitment. performance.

Hypothesis H4. Competitive pressure positively affects Hypothesis H8. I4 positively affects environmental
environmental commitment. performance.

Hypothesis H5. Environmental commitment positively GPI includes modifications and re-designing of the manufacturing
affects adoption of I4 technologies. process to enhance the overall environmental performance and
 10990836, 2022, 5, Downloaded from https://onlinelibrary.wiley.com/doi/10.1002/bse.2989 by Universidade De Coimbra, Wiley Online Library on [17/12/2024]. See the Terms and Conditions (https://onlinelibrary.wiley.com/terms-and-conditions) on Wiley Online Library for rules of use; OA articles are governed by the applicable Creative Commons License
BHATIA AND KUMAR 1909

FIGURE 1 Proposed model

savings in costs (Chen et al., 2006; Huang & Li, 2017). GPI can help for economic performance (Kamble et al., 2020; Zhu et al., 2011) and
organizations in improving economic performance through savings in four items for environmental performance (Kamble et al., 2020; Li
compliance costs and resource savings through reduction in usage of et al., 2020). The items for performance factors are also captured on
energy and environmental damage (Wong et al., 2020). Through GPI, 5-point scale (1: Not at all; 5: Very significant).
firms can also reduce on the emissions and minimize waste generated The items for “Industry 4.0” aim to capture the implementation
through the manufacturing processes and improve overall productivity level and represent the maturity level regarding adequate preparation
and resource efficiency (Chang, 2011; Chiou et al., 2011; Huang & for implementing the I4 technologies (Kamble et al., 2020). Due to the
Wu, 2010). Further, GPI also allows firms to reduce waste disposal complex nature of I4 technologies, many firms are uncertain regarding
costs and costs of material inputs (Wong et al., 2020). Based on this, the outcomes of I4 technologies (Bibby & Dehe, 2018). Therefore,
we hypothesize: these items capture the “degree of implementation” rather than the
success level of I4 technologies. The items are adapted from Kamble
Hypothesis H9. GPI positively impacts economic et al. (2020) and Kumar and Bhatia (2021) and measured using 5-point
performance. scale (1: not considering it; 5: implemented successfully). The content
validity is assured through pre-testing with academic and industry
Hypothesis H10. GPI positively impacts environmental experts. The final version also includes demographic information of
performance. the potential respondents. The items of latent variables are given in
Appendix A.

3 | M E TH O DO LO GY
3.2 | Data collection
3.1 | Questionnaire
The data are collected from Indian manufacturing industries, which
We prepared a survey questionnaire for collecting the data. The theo- include automotive, electrical, electronics, textiles, plastics, and so
retical framework (Figure 1) includes the following constructs: stake- forth. The collection of data from multiple industries allows in collec-
holder pressure, competitive pressure, environmental commitment, I4, tion of more samples and broad application of results (Kumar
GPI, economic performance, and environmental performance. The et al., 2018). The Indian manufacturing industry is growing at a fast
items of each construct are adapted from the published literature. We pace, and it is expected that its contribution to gross domestic prod-
used five items to measure stakeholder pressure (Jiao et al., 2020; uct (GDP) by 2022 will be 25%.iii The production of automobiles grew
Sarkis et al., 2010; Yu & Ramanathan, 2015), four items for competi- at a rate 2.36% between 2016 and 2020, with exports growing at
tive pressure (Liu et al., 2010), four items for environmental commit- 6.94% during the same period.iv The electronics industry has
ment (Wang et al., 2018), and four items for GPI (Dai et al., 2017; El-
iii
https://www.ibef.org/download/Manufacturing-February-2021.pdf, accessed on May
Kassar & Singh, 2019). These scales are captured using the 5-point
07, 2021
Likert scale (1: Strongly disagree; 5: Strongly agree). We used five items iv
https://www.ibef.org/industry/india-automobiles.aspx, accessed on May 07, 2021
 10990836, 2022, 5, Downloaded from https://onlinelibrary.wiley.com/doi/10.1002/bse.2989 by Universidade De Coimbra, Wiley Online Library on [17/12/2024]. See the Terms and Conditions (https://onlinelibrary.wiley.com/terms-and-conditions) on Wiley Online Library for rules of use; OA articles are governed by the applicable Creative Commons License
1910 BHATIA AND KUMAR

witnessed a growth rate of 14% between 2016 and 2019. By 2025, 3.4 | Data analysis approach
appliances and consumer electronics industry is expected to be fifth
largest around the globe. Besides, India has also attracted investments The partial least squares (PLS) approach is used to test the conjec-
from several manufacturing companies recently.v Therefore, it is tures. First, PLS does not require data to follow a normal distribution
important that manufacturing firms actively move towards digitiza- (Chin, 1998). PLS is also preferred when the primary objective of a
tion, which would help to improve efficiency and fulfill customer study is development of the theory (Sreedevi & Saranga, 2017), and
demands. In fact, the manufacturing industry in India has already the study is exploratory (Hair et al., 2014; Sodhi et al., 2012). As our
made a leap towards the adoption of I4 technologies (see footnote iii). study is of exploratory nature (since it uses ST and SCV in the context
Thus, given the importance of Indian manufacturing industry, this of I4), PLS is an appropriate method for testing the conjectures.
study pertains to the same.
The authors gave a brief about sustainability and I4 at the begin-
ning of the survey instrument. The authors took the assistance of 4 | RE SU LT S
“NexGen Market Research” (a data collection firm) to collect data.
Overall, the firm contacted 464 potential firms for filling the survey. 4.1 | Measurement model
Finally, 173 professionals filled the completed questionnaire, resulting
in an overall response rate is 37.28%, considered as satisfactory We assessed convergent validity through loadings and average vari-
(Malhotra & Grover, 1998). The sample consists of 79% of the ance extracted (AVE). The AVE depicts the percentage of variation
responses from the top and middle-level industry professionals. that can be explained by the items of the construct. For instance, an
Regarding the experience, 67% of the responses are from profes- AVE of 0.683 states that the items of the construct used in the study
sionals who have more than 10 years of experience. With respect to can measure 68.3% of the construct. The earlier literature suggests
industry, the distribution of responses is as follows: automotive that AVE should be greater than 0.5 for convergent validity. In this
(28.9%), electrical (15.6%), electronics (28.9%), and plastics (13.3%). regard, we have found that the AVE for all the latent variables or con-
The remaining responses are from other sectors such as appliances structs, except stakeholder pressure, are greater than 0.5. Though
and textiles. We considered firm size as a control variable as it can AVE for stakeholder pressure is marginally less than 0.5, we have kept
potentially affect the findings (Gupta et al., 2020). Generally, large all the items in the model due to their importance. Many studies in
firms possess more resources than small firms; hence, they might be the past have used AVE value lesser than 0.5 for establishing conver-
more actively involved in implementing I4 technologies (Bhatia & gent validity (Wang et al., 2021; Yu & Ramanathan, 2015; Zhao
Kumar, 2021). et al., 2011). We have used other measures of convergent validity like
loadings of the item and composite reliability. The loadings for most
of the items are more than 0.6; however, few items have loading
3.3 | Common method variance (CMV) values less than 0.6 (ECP3 and ENP4) (Beka Be Nguema et al., 2022).
Therefore, they were removed from the model. The loading of IND1
We took care of CMV through several measures. First, we kept the is 0.59, but as it is very close to 0.6 and more than 0.5 (Tenenhaus
items of dependent constructs after the items of independent con- et al., 2005), we have kept it in the model. The composite reliability
structs in the survey instrument (Yadlapalli et al., 2018). We advised (CR) of all the latent variables is above 0.7, indicating adequate reli-
the respondents that the questions in the survey have no specific cor- ability of constructs (Nunnally & Bernstein, 1994). Table 1 shows
rect answer, and they should answer based on the actual situation in loadings, CR, and AVE.
their firm, rather than the feelings and conforming to social norms Discriminant validity depicts that constructs that should have no
(Carter & Jennings, 2004). We examined the correlations among the relationship among themselves do not have any relationship in actual-
latent variables and found that the highest correlation equals 0.577, ity. Discriminant validity is validated by a comparison of AVE and
which is less than 0.9 (Hazen et al., 2015). Using Harman's single fac- inter-construct correlations. We found that AVE of each latent vari-
tor test, we found that first factor explains 24.32% of the variance, able is more than the inter-construct correlations (Fornell &
signifying the absence of CMV (Podsakoff et al., 2003). Additionally, Larcker, 1981) (Table 2). We further validated the discriminant validity
we tested for CMV using the method proposed by Widaman (1985). through heterotrait-monotrait (HTMT) ratios. The HTMT is a measure
We tested two models—first model with only traits and second model of similarity between latent variables. All the HTMT values are less
with inclusion of method factor in addition to traits (Paulraj than 0.9 (Table 3), which further confirms discriminant validity
et al., 2008; Zacharia et al., 2011). The analysis shows that the method (Henseler et al., 2015).
factor accounted for only 4.9% of the variance, which is less than 25%
(Williams et al., 1989). Further, all items of the first model retained
their significance in the second model (Cao & Zhang, 2011). Thus, we 4.2 | Structural model
can conclude that CMV does not affects the results.
We evaluated the path coefficient of each hypothesis and the
v
https://www.ibef.org/industry/manufacturing-sector-india.aspx, accessed on May 07, 2021 corresponding statistical significance. First, we found all the variance
 10990836, 2022, 5, Downloaded from https://onlinelibrary.wiley.com/doi/10.1002/bse.2989 by Universidade De Coimbra, Wiley Online Library on [17/12/2024]. See the Terms and Conditions (https://onlinelibrary.wiley.com/terms-and-conditions) on Wiley Online Library for rules of use; OA articles are governed by the applicable Creative Commons License
BHATIA AND KUMAR 1911

TABLE 1 Reliability and validity

Construct Item Loading CR AVE Cronbach's alpha
Stakeholder pressure STP1 0.64 0.82 0.48 0.72
STP2 0.61
STP3 0.75
STP4 0.65
STP5 0.77
Competitive pressure COP1 0.76 0.82 0.54 0.72
COP2 0.65
COP3 0.76
COP4 0.77
Environmental commitment EC1 0.75 0.83 0.55 0.73
EC2 0.69
EC3 0.75
EC4 0.78
Industry 4.0 I41 0.59 0.84 0.51 0.76
I42 0.65
I43 0.77
I44 0.73
I45 0.79
Green process innovation GPI1 0.67 0.80 0.50 0.66
GPI2 0.70
GPI3 0.78
GPI4 0.67
Economic performance ECOP1 0.79 0.80 0.50 0.67
ECOP2 0.69
ECOP3 -
ECOP4 0.63
ECOP5 0.69
Environmental performance ENV1 0.66 0.78 0.54 0.58
ENV2 0.77
ENV3 0.76
ENV4 -

Note: All loadings are statistically significant.

TABLE 2 Discriminant validity—Fornell and Larcker criteria

STP COP EC I4 GPI ECOP ENV

STP 0.688
COP 0.577 0.736
EC 0.439 0.419 0.741
I4 0.329 0.314 0.450 0.711
GPI 0.403 0.446 0.398 0.424 0.704
ECOP 0.377 0.383 0.334 0.283 0.344 0.703
ENV 0.372 0.348 0.275 0.320 0.401 0.537 0.732

inflation factors (VIFs) to be less than the recommended cut-off environmental commitment, β = 0.297), H4 (Competitor pressure and
value of 5 (Hair et al., 2011). The following hypotheses are found environmental commitment, β = 0.247), H5 (Environmental commit-
to be significant at p < 0.01: H3 (Stakeholder pressure and ment and I4, β = 0.349), H6 (I4 and GPI, β = 0.424), H9 (GPI and
 10990836, 2022, 5, Downloaded from https://onlinelibrary.wiley.com/doi/10.1002/bse.2989 by Universidade De Coimbra, Wiley Online Library on [17/12/2024]. See the Terms and Conditions (https://onlinelibrary.wiley.com/terms-and-conditions) on Wiley Online Library for rules of use; OA articles are governed by the applicable Creative Commons License
1912 BHATIA AND KUMAR

TABLE 3 Discriminant validity—HTMT ratios

STP COP EC I4 GPI ECOP ENV

STP
COP 0.802
EC 0.600 0.575
I4 0.426 0.422 0.592
GPI 0.572 0.641 0.577 0.590
ECOP 0.521 0.565 0.455 0.382 0.478
ENV 0.560 0.545 0.425 0.464 0.635 0.892

TABLE 4 Structural model significant effect on both the performance factors. In M2, I4 has sig-
nificant effect on GPI, and GPI has significant effect on performance
Hypothesis Coefficient t value p value Supported?
factors. Further, the direct effect of I4 on both the performance fac-
H1: STP ! I4 0.115 1.184 0.237 No
tors is dropped and significant only for the relationship between I4
H2: COP ! I4 0.076 0.818 0.414 No
and environmental performance. Thus, findings support the mediation
H3: STP ! EC 0.297 3.734 0.000 Yes
of GPI between I4 and performance outcomes.
H4: COP ! EC 0.247 3.652 0.000 Yes Similarly, to test the mediation of environmental commitment, we
H5: EC ! I4 0.349 3.474 0.001 Yes analyzed two models. Model M3 does not include the construct “envi-
H6: I4 ! GPI 0.424 5.408 0.000 Yes ronmental commitment” and includes only the direct relationships of
H7: I4 ! ECOP 0.167 1.408 0.160 No stakeholder and competitive pressure on I4. Model M4 includes the
H8: I4 ! ENV 0.183 2.148 0.032 Yes construct “environmental commitment”; thus, M4 includes indirect
H9: GPI ! ECOP 0.273 2.819 0.005 Yes and direct effects of competitive and stakeholder pressure on I4. In
H10: GPI ! ENV 0.323 4.116 0.000 Yes M3, stakeholder and competitive pressures have significant effect on
I4. In M4, the indirect effect of stakeholder and competitive pressure
on I4 through the mediator is significant. Further, the direct effect of
stakeholder and competitive pressures on I4 is insignificant. Thus,
economic performance, β = 0.273), and H10 (GPI and environmental environmental commitment mediates the relationships of stakeholder
performance, β = 0.323). Hypothesis H8 (I4 and environmental and competitive pressure on I4.
performance) is also significant at p < 0.05 (β = 0.182). We also conducted Sobel's test to confirm the mediation effects
The direct relationship between stakeholder and I4 (H1) is not of both the proposed mediators (Sobel, 1982). The highly significant
found to be significant. Similarly, the direct relationship between com- values from Sobel's test provide support for both the proposed media-
petitive pressure and I4 (H2) is also not found to be significant. Fur- tors. Finally, we evaluated the size of both the mediating effects by
ther, Hypothesis H7 (I4 and economic performance) is also found to variance accounted for (VAF) (ratio of indirect effect to the total
be insignificant. Rather, I4 indirectly affects economic performance effect) (Nitzl et al., 2016). The VAF of all the effects is more than 20%,
through GPI (explained in detail in Section 4.3). Finally, firm size did which confirms the mediation effect. The mediation analysis is
not have any significant effect on I4 (β = 0.083; p > 0.10). The provided in Table 5.
hypotheses testing results are given in Table 4. The model explains
23.6%, 14.1%, and 18.8% of the variance (R2) for I4, economic, and
environmental performance, respectively. Stone-Geisser's (Q2) values 5 | DISCUSSION AND MANAGERIAL
for endogenous latent variables are greater than zero, which confirms IMPLICATIONS
adequate predictive power (Peng & Lai, 2012).
Industry 4.0 provides significant technological advancements to orga-
nizations. While technological advances allow the development of
4.3 | Mediation analysis products and processes, digital technology must be integrated with
sustainability to ensure sustainable development. The three pillars of
The mediation effects of two proposed mediators are tested using the sustainable development include environment, society, and economy,
Baron and Kenny (1986) approach. First, to analyze the mediating which are often referred as triple bottom line (TBL). Here, environ-
effect of GPI, we examined two models. Model M1 does not include ment plays a very dominant role, and hence, we have considered
GPI and includes only the direct relationships between I4 and perfor- environmental commitment as an important construct in the study.
mance factors. Model M2 includes direct as well as indirect relation- The current study draws upon the ST and SCV to study the influence
ships between I4 and performance through GPI. In M1, I4 has a of stakeholder and competitive pressure towards sustainability, on I4
 10990836, 2022, 5, Downloaded from https://onlinelibrary.wiley.com/doi/10.1002/bse.2989 by Universidade De Coimbra, Wiley Online Library on [17/12/2024]. See the Terms and Conditions (https://onlinelibrary.wiley.com/terms-and-conditions) on Wiley Online Library for rules of use; OA articles are governed by the applicable Creative Commons License
BHATIA AND KUMAR 1913

TABLE 5 Results—mediation analysis

Hypothesis Model M1 Model M2 Standard error VAF Sobel test
STP ! I4 0.220* 0.115 0.097 47.40% 2.51
COP ! I4 0.164* 0.076 0.093 53.14% 2.53
STP ! EC 0.297** 0.081
COP ! EC 0.247** 0.066
EC ! I4 0.349** 0.101
Path Model M3 Model M4 Standard error VAF Sobel test
I4 ! ECOP 0.285** 0.167 0.119 55.08% 2.49
I4 ! ENV 0.322** 0.183* 0.085 42.80% 3.29
I4 ! GPI 0.424** 0.078
GPI ! ECOP 0.273** 0.097
GPI ! ENVP 0.323** 0.078
*
p < 0.05.
**
p < 0.01.

technologies. Further, the study also analyzes the role of GPI between First, the findings show that stakeholders and competitive pres-
I4 and performance outcomes. The results support the mediating sure do not directly influence I4 technologies, but environmental com-
effect of both environmental commitment and green process mitment acts as an important mediator between these relationships.
innovation for adopting I4 technologies. Researchers and industry Thus, stakeholders and competitive pressure indirectly influence the
professionals are utilizing I4 to address issues and challenges related adoption of I4 technologies by firms through environmental commit-
to the triple bottom line of sustainable manufacturing. For example, ment. We leverage ST and SCV to recognize that firms perceive pres-
environmental challenges like those of resource depletion, climate sure from stakeholders and competitors towards sustainability and
change, and environmental protection can be addressed with I4. This implement I4 technologies to achieve the desired outcomes. Using
brings a new dimension to I4, which was traditionally thought of as the multi-theoretic approach, this study provides an understanding of
the way of digitizing the operations and getting advantages out of how organizations respond to pressure towards sustainability from
it. However, for this to be realized, there should be complete coher- stakeholders and competitors.
ence and convergence of all I4 technologies, including those of AI, Earlier studies in the literature have used ST to examine the effect
data analytics, IoT, machine vision, big data analytics, and machine of stakeholder pressure towards GSCM and other environmental
learning. The coherence and convergence can be achieved by vertical management practices (Dai et al., 2014; Jiao et al., 2020). These stud-
and horizontal integration wherein all the production areas and dis- ies have found stakeholder pressure to be a crucial antecedent for
tributors, and customers are integrated within the system. By vertical GSCM practices. Our study extends this knowledge in the context of
integration, we meant integrating various information technology sys- I4 technologies. However, in contrast to the other studies, our results
tems at different hierarchical levels ranging from the lowest level of show that firms' commitment towards the environment is an impor-
actuators and sensors to the highest level of systems. On the con- tant mediator in this relationship. This indicates that in response to
trary, horizontal integration refers to the integration of various stakeholders and competitive pressure, firms will implement I4 tech-
information technology systems which are used in different stages nologies only if they understand about sustainability and environment
of manufacturing that involve an exchange of energy, materials, and management practices, and are commitment towards environment
information. The seamless integration increases not only the trans- protection.
parency of the production processes but also optimizes the supply Environmental commitment can help organizations to build sensi-
chain activities. These types of connected systems produce a tivity towards environmental challenges. Environment commitment
massive amount of data that can play a pivotal role in developing thus encourages organizations to respond to concerns and pressures
strategies from societal, environmental, and economic perspectives. towards sustainability and implement environmental practices (Chen
In a nutshell, the study aims extends the knowledge on relationships et al., 2015; Muller & Kolk, 2010). The indirect effect shows that firms
among stakeholder and competitive pressures, environmental com- do consider the adoption of I4 technologies for responding to
mitment, I4, GPI, and economic and environmental performance. pressures. In this respect, the role of top management becomes crucial
Identifying these relationships will help managers decide on dedicat- (Dai et al., 2014), and studies have emphasized it as an important
ing the effort and resources towards I4 technologies to respond “internal organizational resource” for environment management
towards competitive and stakeholder pressures and contribute to (Carter & Jennings, 2004; Gavronski et al., 2011). An implication of
sustainability. The implications of these findings are discussed this result is that top management in an organization needs to
below. evaluate how stakeholders and competitors recognize the significance
 10990836, 2022, 5, Downloaded from https://onlinelibrary.wiley.com/doi/10.1002/bse.2989 by Universidade De Coimbra, Wiley Online Library on [17/12/2024]. See the Terms and Conditions (https://onlinelibrary.wiley.com/terms-and-conditions) on Wiley Online Library for rules of use; OA articles are governed by the applicable Creative Commons License
1914 BHATIA AND KUMAR

of I4 technologies and respond accordingly. This finding also indicates performance. Future researchers can also use longitudinal data to
that organizations will not respond to competitive and stakeholder examine this model. The case based studies can also be useful to rein-
pressures unless they perceive and recognize the potential force the findings of this study.
benefits of I4.
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1918 BHATIA AND KUMAR

APP E NDIX A: CONSTRUCTS AND MEASUREMENT ITEMS Values the natural environment as much as profits (EC4)
Industry 4.0 (I4)
Internet of Things (I41)
Stakeholder pressure (STP) Cloud Computing (I42)
We feel pressure from customers to contribute towards sustain- Cyber Physical systems (I43)
ability (STP1) Big Data Analytics (I44)
We feel pressure from government to contribute towards sustain- Additive manufacturing (AM) (I45)
ability (STP2) Green process innovation (GPI)
We feel pressure from environmental organizations/societies/ We improve existing processes to make them more environmen-
NGOs to contribute towards sustainability (STP3) tal friendly (GPI1)
We feel pressure from supply chain partners to contribute We use existing technologies to their maximum to make pro-
towards sustainability (STP4) cesses more environmental friendly (GPI2)
We feel pressure from employees of our organization to contrib- We re-design production processes to improve environmental
ute towards sustainability (STP5) efficiency (GPI3)
Competitor pressure (COP) We re-design and improve processes to meet environmental
Sustainability initiatives have been widely implemented by our criteria and directives (GPI4)
competitors (COP1) Economic performance (ECO)
Our competitors who have implemented sustainability initiatives Reduced waste treatment costs (ECO1)
benefitted greatly (COP2) Reduced inventory management costs (ECO2)
Our competitors who have implemented sustainability initiatives Reduced material purchasing costs (ECO3)
are perceived favorably by their customers (COP3) Reduced waste disposal costs (ECO4)
Our competitors who have implemented sustainability initiatives Reduced rejection and rework costs (ECO5)
became more competitive (COP4) Environmental performance (ENV)
Environmental commitment (EC) Reduced solid waste (ENV1)
Support from top management and staff (EC1) Reduced liquid waste (ENV2)
Commitment to reduce harmful emissions resulting from opera- Reduced air emissions (ENV3)
tions (EC2) Reduced consumption of hazardous/toxic materials (ENV4)
Consistently assesses the effect of business activities on environ-
ment (EC3)