Which Factors Determine the Adoption of the Internet of Things? Impacts and Benefits

Abstract

The Internet of Things becomes increasingly important for the production process of firms. Yet, little is known about the factors that determine the adoption of the Internet of Things among firms and its impact on firm performance. This paper provides first econometric evidence on the determinants of the Internet of Things among firms and on potential performance impacts. The analysis is based on firm-level data from 874 German firms and a probit model as well as an instrumental variable regression as econometric approach. The results reveal that collaboration platforms, B2B e-commerce, the use of computers, a large firm size and the use of ERP software increase the propensity to use the Internet of Things. In contrast, few competitors are negatively related to the Internet of Things. The results suggest that the causality runs from the determinants to the adoption of the Internet of Things. The results further indicate that sales and product innovation are highest for firms jointly using the Internet of Things and collaboration platforms while a reduction of the workforce is also highest in this case.