The potential of smart factories in reducing environmental emissions: the evidence from Chinese listed manufacturing firms

The nature of smart factories to help manufacturing firms reducing environmental emissions has attracted the widespread attention of governments and industries. However, some research also worried that if smart factories were not effectively constructed, they may increase firms’ environmental emissions. To address this concern, we use PSM-progressive DID model to analyze the relationships between the construction of smart factories and environmental emissions, based on 144 Chinese listed manufacturing firms. The main findings are as follow. First, the construction of smart factories can lead to the short-term increase of 7.55% GHG emissions (1.001 tCO2e) and 4.12% air pollutants cost (1.011 $) per $M operation cost for firms. Second, the negative impact of smart factory construction on GHG emissions can be partially explained by physical technologies. Third, mimetic institution (industrial maturity of environment management system) can reduce the negative impact of smart factory construction, but coercive institution (government regulation) and normative institution (social media attention) have no significant moderating effect. With these findings, this study provides a clear understanding of how the construction of smart factories influences firms’ environmental sustainability and accordingly offers insights for business considering environmental objectives in smart factory development.