Facilitating the Malaysian Manufacturing Sector in Readiness for Industry 4.0: A Mediating Role of Organization Innovation

Introduction

The Gross Domestic Product (GDP) of most countries is depending on the contribution of their industries, especially by the manufacturing industry (MacDougall, 2014). However, due to fast shift in technological development, organizations are moving towards smart manufacturing, also known as Industry 4.0. The idea of advance or smart manufacturing is to deal with upcoming, digitally-enabled production systems. There is no doubt that such visionary concepts lead to technical and operational complexities in manufacturing processes at all levels of the organization and thus require continuous innovation (Erol et al., 2016). Industrial experts also suggested that Organization Innovation is an essential tool for manufacturing organizations (Hecklau, Galeitzke, Flachs, & Kohl, 2016). Manufacturing companies should build their innovation capabilities to tackle the instant issues that may appear during production processes. Innovation is also considered as imperative for improvement in the performance of manufacturing organizations. Not limited to that, it is also considered as a key driver for employment and development of the economy, while decreasing economic inequality.

An innovative organization emphasizes the novel production system for long-term survival (Palazzeschi, Bucci, & Fabio, 2018), which can only be achieved by adopting the technology. Organization Innovation and the adoption of new technology go hand in hand to effectively perform operations and add quality to a production system. However, innovation does not appear at its own, as the organizations have to adapt suitable organizational practices that support the development of Organization Innovation capabilities. Practices such as specific leadership style, human resource management, and suitable organization structure can help in the development of such capabilities (Mohelska & Sokolova, 2018). Knowledge Oriented Leadership and suitable organization structure are also influencing factors to change (Ghobakhloo, 2018; Gilchrist, 2018; Shamim et al., 2016). Knowledge Oriented Leaders are committed to facing any challenges, promoting innovation and managing new knowledge by treating challenges as the capital of the company. Whereas, Human Resource Management ensures the recruitment, learning and development of those employees that can embrace changes and promote creativity. While, Decentralized Organization Structure creates a favorable environment that foster Organization Innovation.

A few recent studies have emphasized on the technological aspect but did not consider the prompting practices that assist Organization Innovation in the epoch of Industry 4.0 (Shamim, Cang, Yu, & Li, 2016). Naqshbandi and Jasimuddin (2018) have also highlighted the lack of empirical research in Knowledge Oriented Leadership that focuses on Organization Innovation. The same gap in the literature is underlined by Mohelska and Sokolova (2018) that recommended further research on Knowledge Oriented Leadership and Decentralized Organization Structure due to the factors’ importance in supporting organizational innovation to achieve effective implementation of Industry 4.0. A strategic approach to management is defined in this contribution. Therefore, the aim of this study is to focus on practices that are suitable to Organization Innovation for the transformation of Malaysian manufacturing sector in Industry 4.0.