Assessment of the effects of implementing industrial internet of things technologies on the resilience of supply chains and the total factor productivity of manufacturing industries

Abstract

The paper analyzes the impact of implementing industrial internet of things (IIoT) technologies on the resilience of supply chains and the total factor productivity (TFP) of manufacturing enterprises, taking into account the productivity pit effect and sectoral heterogeneity of digitalization. The purpose of the study is to develop and test an integrated methodology for the quantitative assessment of the IIoT contribution to TFP and key indicators of supply chain resilience. The empirical base consists of a balanced panel of 608 enterprises from 12 sub-industries for the period 2017–2023 (4,256 firm-years), formed on the basis of financial statements, industry databases on technological equipment, and macroeconomic statistics. The methodology relies on the Cobb–Douglas production function expanded by digital capital and the IIoT saturation index (calculated by the principal component method), stochastic frontier analysis for TFP extraction, fixed-effects and IV-GMM regression models to control for endogeneity, difference-in-differences analysis to estimate the causal effect of implementing integrated IIoT platforms, as well as clustering of digital transformation strategies using the k means method. It is shown that IIoT implementation statistically significantly reduces the cash conversion cycle (by ~16.7%), inventory levels (by ~29.7%), and simultaneously increases demand forecasting accuracy and the share of on-time deliveries, thereby eliminating the traditional trade-off between efficiency and reliability of supply chains. Estimation of the production function revealed a positive and robust output elasticity with respect to the IIoT index (up to 0.067 in the GMM specification) and complementarity between technology and labor, while the effect on TFP is of a threshold nature and becomes statistically significant at IIoT investment levels of at least 1.5–2% of revenue. Sectoral analysis showed the highest ROI and greatest TFP elasticity in energy-intensive and continuous production sectors (chemical industry), as well as the presence of a digital gap between leaders and laggards. It is concluded that IIoT acts simultaneously as a driver of intensive growth and a buffer for logistics risks; however, realizing this potential requires a shift from pilot projects to comprehensive digital transformation and the consideration of cyber risks and threshold effects in investment models.