Key Decisions of Smart Factory Transformation and Firm Performance: A Case of Fundamental Manufacturing SMEs in Korea

Despite the increasing use of emerging operational and information technologies in smart factory transformations, there remains a lack of understanding of how firms should reshape their transformation strategies to achieve desirable firm performance. This study aims to investigate the role of government support, the appropriate level of smart factory evolution, and the strategic decision to leverage manufacturing systems, such as ERP and MES, in achieving firm performance. This study investigates 511 small and medium-sized enterprises (SMEs) in the fundamental industries dealing with casting, molding, forging, welding, surface treatment, and heat treatment that have implemented smart factories. The results suggest that companies implementing smart factories using internal capabilities rather than government support perform better, and no significant difference exists in financial performance among the various developmental levels of smart factory evolution. Additionally, companies that built smart factories using ERP or MES achieved higher performance, suggesting that the use of ERP or MES has a leveraging effect on a firm performance. These findings provide valuable insights for practitioners in fundamental industries by revealing the relationship between key decisions regarding smart factory transformation and corporate performance.