Impact Of Ties With Service Intermediary On Service Innovation In Manufacturing Firms

In order to build new competitive advantage, an increasing number of manufacturing firms are transforming from 'product seller' to 'service provider'. However, the knowledge and technology that well support product innovation cannot be used in service innovation because the nature of the service differs from products, which suggests a wider scope for manufacturing firms to search innovation knowledge. With the scope increased, the cost of innovation search may exceed its benefit, so a lot of manufacturing firms continued to rely on the original technical knowledge, which always caused failure, and some come to a halt and missed the opportunities.In this research, the ties with service intermediary will be discussed as a solution to above dilemma. The service intermediaries interact with clients and provide knowledge-intensive products and serviced, which lead to reproduction and spread of knowledge. Meanwhile, service intermediary positions on the intersection of different companies, organizations and industries, therefore have potential ability to exchange information and knowledge. With the help of service intermediary, manufacturing firms can increase the benefit of boundary-spanning search while decreasing the cost, so can realize more effective service innovation. The data from 241 companies in Yangtze River area will empirically support this argument.Further, although the ties with service intermediary are important for manufacturing firms, this cannot be a catholicon. In China, it cannot be ignored that the market environment, especially competition and uncertainty, significantly influences the innovation activities in companies. So in this research, the author will also discuss that, when the market environment changed, do the ties with service intermediary will still be effective on service innovation? This research will use Efficiency Market Theory and Social Network Theory, which hold conflict point of views, to explain this argument. The empirical result will suggest that the Efficiency Market Theory more suits for Chinese situation and support the situational views about ties.