Purpose Since digital technologies are taking over the nature of the business, Industry 4.0 is something that many small- and medium-sized enterprises (SMEs) cannot afford to overlook, particularly in an emerging economy such as India. The paper examines the actual presence of investments in Industry 4.0 in the financial performance of firms in terms of return on assets (ROA), return on equity (ROE) and operating profit margins (OPM) in Indian SMEs. Design/methodology/approach The present study is based on a balanced sample of 994 finished year reports of 142 SMEs between 2018 and 2024. The quantile panel regression is used to determine the linear and nonlinear relationships in order to identify the variation in the Industry 4.0 effects between levels of financial performance. Findings The results indicate that there exist positive associations between Industry 4.0 adoption and financial performance at low levels. The positive influences are also found at the middle levels of performance in most of the estimated models. The Industry 4.0 adoption financial benefits seem to be minimal at the higher levels of performance. The quadratic findings indicate the premature adoption increases the cost incurred prior to the effective performance improvements. This trend indicates that the Industry 4.0 investment decisions must be taken with caution and on a gradual basis. Research limitations/implications The study is restricted to Indian SMEs and this could have limited generalizability. Practical implications Results provide practical advice to SME leaders, policymakers and digital advisors. The gradual implementation of Industry 4.0 is capable of ensuring financial benefits and operation preparedness. Overinvestment in absence of preparation usually yields poor financial results. Originality/value This study uses quantile regression to identify the nonlinear Industry 4.0 impacts. The methodology enhances both empirical and theoretical knowledge on the digital transformation among SMEs.
Tarode et al. (Fri,) studied this question.