Monitor digitalization : evidence from a large manufacturing firm in China

Abstract

This paper investigates the organizational barriers that hinder the adoption of new managerial practices, focusing on interest misalignment within firms. Using TGOOD Chuankai Electric Co., Ltd., a Chinese manufacturing firm, as a case study, the research explores the effects of implementing a digital managerial system, the Smart Factory, on group productivity, worker wages, and personnel transfers. The staggered rollout of the Smart Factory system across different product families between 2020 and 2023 provides a unique opportunity to examine the impact of modern management practices on traditional production methods. Through a staggered difference-indifferences (Diff-in-Diff) identification strategy, the study evaluates the influence of the system on total wages, performance wages, working hours, subjective evaluations, and skill levels at both individual and team levels. The findings demonstrate that the Smart Factory system enhances worker productivity and improves managerial coordination by providing more precise monitoring tools. However, the effects of the system are more pronounced in teams that have not yet established assembly lines, indicating the importance of context in the effectiveness of new systems. Additionally, the study includes a survey to assess workers’ attitudes toward the Smart Factory, revealing that job satisfaction, egalitarian beliefs, and perceived productivity benefits significantly influence their willingness to adopt the system. Overall, this study contributes to the literature on organizational change by identifying key factors—such as interest misalignment—that impede the adoption of modern managerial systems in developing countries. The research offers practical insights for firms seeking to integrate digital management tools and highlights the importance of aligning managerial practices with workers' perceptions to ensure successful adoption.