Internet of Things adoption and manufacturing firms’ performance: the role of innovation capabilities

Purpose This study investigates key factors influencing IoT adoption in medium- and large-sized Malaysian manufacturing firms and examines its impact on organizational performance, with innovation capabilities as a moderating factor. Design/methodology/approach A survey of 486 manufacturing enterprises in Malaysia was conducted using an online questionnaire. The data were analyzed using partial least squares structural equation modeling (PLS-SEM). Findings The study identifies perceived compatibility, security concerns, expected benefits, government support, market uncertainty, perceived usefulness, ease of adoption, and resistance to change as key drivers of IoT integration. IoT adoption enhances both operational and financial performance, with innovation capabilities strengthening this relationship. Practical implications Manufacturers should prioritize innovation capabilities to maximize IoT-driven performance gains. This study raises awareness among stakeholders about the critical factors influencing IoT adoption and its benefits. Originality/value This study fills a gap by integrating the TOE and HOT-Fit frameworks to provide a comprehensive model of IoT adoption. It also uniquely examines innovation capability as a moderator, offering new insights into how IoT enhances firm performance.