Does the Servitization Strategy Improve the Performance of Manufacturing Enterprises in China?

Abstract

There is a controversy of the relationship between servitization of manufacturing and business performance in the literature. Based on the data of Hu-Shen A-share listed manufacturing enterprises in 2013, this paper examined the relationship in the above with the traditional servitization level variable(SERL) and the servitization decision variable(SERD), which was generated in a dynamic perspective of strategic decision, to measure the servitization strategy. The empirical results showed that the servitization decision was positively correlated with the market performance (Tobin's q), and the servitization level was negatively correlated with the financial performance, including return on assets (ROA), economic value added change rate (EVAC) and earnings per share (EPS). Further, we discussed the results from the signal theory and diversification discount theory.

Exploring the relationship between product-service system and profitability

“…A coherent result has been revealed by Li et al (2015) focusing 134 listed manufacturing firms of a specific province of China (Zhejiang). Moreover, the empirical results of Min et al (2015) show that the implementation of servitization strategy is a long-term gradual transformation process, and its effects on business performance vary in different stages. The servitization decision is positively correlated with the market performance (Tobin's q) even if the financial performance is negatively related to the servitization level in the long-term perspective.…”

“…A relevant element to note, that will be useful in the development of our study, is that Table 1 mixes studies conducted in different countries. As Gebauer et al (2012) highlighted that limited knowledge is available about the phenomenon of servitization in developing countries, we included in the review some studies specifically focusing on such settings (Chen 2010;Li et al 2015;Min et al 2015;Lin et al 2019). In confirm of the importance of the country specificity as a variable to be included in the analysis, Szàsz et al (2017), exploring the influence of economic context on servitization, reveal that economic context has a negative direct effect on service provision, and through that a negative indirect effect on service return.…”