Transforming Industry 4.0 technologies into sustainable business performance through technology implementation and government policy support

Small and medium-sized enterprises (SMEs) increasingly adopt Industry 4.0 technologies to improve sustainability, yet firms often struggle to translate these technological investments into meaningful performance outcomes. This study examines how Industry 4.0 technologies, including big data (BiD), the Internet of Things (IoT), and cyber-physical systems (CPS), contribute to sustainable business performance (SBP) by considering the mediating role of technology implementation and the moderating role of government policy. Using a time-lagged survey design, data were collected from 388 SMEs in Pakistan and analyzed using partial least squares structural equation modelling (PLS-SEM). The findings demonstrate that BiD, IoT, and CPS positively influence SBP. Technology implementation significantly mediates the relationships between Industry 4.0 technologies and SBP. Furthermore, government policy strengthens the relationships of BiD and CPS with SBP, while its moderating effect on IoT is insignificant. This study contributes to the industry 4.0 and sustainability literature by demonstrating that digital technologies function as strategic resources whose value depends on implementation capabilities and targeted support. The findings provide practical implications for SME managers and policymakers by emphasizing capability development, digital infrastructure, and technology-specific policy interventions to achieve sustainable digital transformation.