The Relationship Between Servitization And Firm Performance In Manufacturing Frms

In the recent decades,with the development of globalization and information technology,the academia and business world have realized that manufacturing firms are faced with the increasing commoditization,convergence and homogenization of goods' characteristics and attributes such that differentiation is severely diminished or even vanished.In order to acquire competitive advantage in such fierce competition,manufacturing firms gradually shift from physical products manufacturing toward service offering,which is called "servitization".Since servitization could create differentiation and boost customer satisfaction and loyalty,it is often regarded as an effective means for manufacturing firms to obtain greater competitive edge than solely physical goods.However,the relationship between servitization and firm performance in manufacturing firms is still ambiguous.Prior research on the servitization-firm performance link has shown that the effect of servitization on firm performance is positive,negative,non-linear,and even insignificant.Therefore more empirical research on the relationship between servitization and firm performance is needed.Since firm performance is a multi-dimensional construct and extant literature focuses on the relationship between servitization and firms' profitability indicators of the financial performance,this thesis extends the performance dimensions and explores the relationship between servitization and multiple performance indicators(namely,operating margin,sales growth,operating efficiency and asset-liability ratio).The regression results of this thesis show that there is a U-shaped curvilinear relationship between servitization and two performance indicators(namely operating margin and operating efficiency),while there is a negative linear relationship between servitization and sales growth,and no significant relationship between servitization and asset-liability ratio.Due to the fact that the research findings on the servitization-firm performance relationship in different research contexts are inconsistent and even contradictory,there might be some external and internal contingency factors affecting this relationship.Extant studies categorize these contingency factors into environmental and firm-specific variables and the majority of studies concentrate on the moderating effect of firm-specific variables such as organizational design factors and organizational capabilities.However,the limited research explores the moderating effect of environmental variables on the servitization-firm performance relationship.In order to narrow this gap,this thesis examines how industry characteristics(namely,industry clockspeed,industry concentration and industry maturity)moderate the performance effect of servitization.Based on the regression results,this thesis presents some significant findings:industry clockspeed significantly moderates the U-shaped relationship between servitization and operating margin,industry maturity moderates the U-shaped relationship between servitization and operating efficiency and the negative relationship between servitization and sales growth,whereas industry concentration has no significant moderating effect on the servitization-firm performance relationship.Moreover,despite the fact that extant literature has proposed some important firm-specific factors(including organizational design factors,organizational capabilities,etc.)moderating the servitization-firm performance relationship,these firm-specific moderators are scattered and less systematic,which calls for a clear and systematic theoretical framework to articulate the moderating effect of firm-specific factors on this relationship.Therefore,this thesis investigates how some firm-specific variables moderate relationship between servitization and firm performance in terms of strategic fit and resource allocation.Specifically,strategic fit is demonstrated from service relatedness and product innovation while resource allocation mode is constructed from marketing resources,absorbed slack resources and unabsorbed slack resources.Based on the empirical analysis,this thesis displays some conclusions from the perspectives of strategic fit and resource allocation.On one hand,this thesis finds that service relatedness significantly moderates the U-shaped relationship between servitization and operating efficiency while product innovation significantly moderates the U-shaped relationship between servitization and operating margin;on the other hand,marketing intensity has no impact on the performance effect of servitization,absorbed slack resources significantly moderates the U-shaped relationship between servitization and operating efficiency while unabsorbed slack resources moderates both the U-shaped relationships between servitization-operating margin and servitization-operating efficiency.Overall,this thesis enriches and extends the research theories on the relationship between servitization and firm performance and the moderating factors affecting this relationship,and provides some significant theoretical and managerial implications.First,this thesis shows a clear and intensive research framework on the relationship between servitization and firm performance,explores the specific effect of servitization on multiple firm performance indicators(namely operating margin,sales growth,operating efficiency and asset-liability ratio),and provides great theoretical significance by answering "whether it is worth to do huge investment when implementing servitization".Second,this thesis examines the moderating effect of industry characteristics(namely,industry clockspeed,industry concentration and industry maturity)on the performance effect of servitization,which offers a better and deeper understanding of the industry environment where it is more suitable for manufacturing enterprises to implement servitization.In addition,this thesis discusses the moderating effect of strategic fit on the relationship servitization and firm performance in terms of two strategic supporting activities(namely service relatedness and product innovation),which answers the question "how manufacturing firms acquire the great success of servitization by strategic supporting activities".Apart from these,this thesis investigates the impact of resource allocation on the relationship between servitization and firm performance based on three categories of resources(namely,marketing resources,absorbed slack resources and unabsorbed slack resources),which confirms the importance of resource allocation and provides effective guidance for the selection of resource allocation mode by which manufacturing firms could readily achieve the success of servitization.