Role of investments in profit formation in the era of Industry 4.0: Case study of the Czech manufacturing industry

This study investigates the role of investments in shaping profitability within the Czech manufacturing industry between 2008 and 2022. Drawing on comprehensive industry-level data, we analyze the relationship between investment volume, efficiency, and profitability, particularly within the evolving framework of Industry 4.0. Our findings show that larger sectors with higher investment volumes generally achieve greater profitability. However, this relationship is non-linear: excessive investments can reduce efficiency, as reflected in declining added value per unit of investment. Regression analyses reveal that added value is the primary driver of profitability across manufacturing industrial sectors. Other factors, such as workforce size and the lagged effects of investments, exhibit only limited explanatory power. Furthermore, the study identifies inefficiencies arising from overinvestment, which may be attributed to market saturation, failure to fully realize economies of scale, and the unintended effects of government subsidy schemes. These results emphasize the importance of strategic investment planning that prioritizes long-term efficiency rather than short-term quantitative expansion. In the rapidly evolving context of Industry 4.0, firms must align their investment strategies with sector-specific conditions and technological demands to maintain sustainable competitiveness. This study illuminates the complex dynamics between investment behavior and profitability, offering valuable insights for managerial decision-making and economic policy formulation. It contributes to a broader understanding of how targeted investment strategies can enhance the performance of manufacturing sectors undergoing technological transformation.