Services and the internationalization of manufacturing firms in Indonesia

Abstract

Services have become the engine of the global economy. However, the role of services in the internationalization strategy of emerging market firms remains under-researched. In a case study of Indonesia, we focus on the role played by manufacturing firms' increasing use, production, and sale of services (or "servicification") in their productivity and exports. We provide a theoretical and empirical framework to study the relationship between servicification, productivity, and exports at firm level. In terms of theory, we rely on the Resource-Based View of internationalization in a heterogeneous firms setting. Regarding methodology, we use panel techniques with administrative firm-level data from the automobile industry. We show that servicification increases the probability of emerging market manufacturing firms exporting, both directly and indirectly through increases in productivity. Results from our case study provide evidence for emerging market firms that, on the one hand, productivity mediates the relationship between servicification and internationalization, and on the other hand, servicification moderates the relationship between productivity and internationalization. Our findings imply that creating unique resources through servicification allows firms to gain a competitive advantage that increases their productivity and helps them to internationalize.

The Nexus between Food Security and Investment, Exports, Infrastructure, and Human Capital Development

“…However, the impact of service GDP on agricultural production and the food security index is positive but not significant. The findings can be linked to the income effect stemming from the rapid growth of service activities in Indonesia and their impact on productivity [71]. Services constitute more than 45% of Indonesia's gross domestic product and are a major source of employment.…”

Servitization and firm productivity premium across the product value chain: evidence from Russian manufacturing firms

“…First, servitization affects financial indicators by enabling stable revenue generation throughout the product life cycle and economic downturns (Gebauer et al, 2010a(Gebauer et al, , 2010b(Gebauer et al, , 2010c, creating new revenue streams Ariu et al, 2016) and influencing revenue and profit growth (Kohtamäki et al, 2013;Eggert et al, 2011Eggert et al, , 2014. Furthermore, servitization can enhance a firm's entry into new markets and its overall export performance (Hu et al, 2021;Huang et al, 2022;Islam and M arquez-Ramos, 2023) as well as establishment of interfirm linkages. This includes the impact of service exports on goods exports (Ariu et al, 2016), internationalization through foreign direct investment (Görg and Jabbour, 2016) and the offshoring of intermediate inputs (Debaere et al, 2013), which also enhances efficiency and enables the generation of additional revenue.…”

“…However, it is important to note that the number of studies focused on servitization in developing and emerging economies is considerably smaller (Guo et al , 2015; Szász et al , 2017). Indeed, despite the increasing number of servitization studies most of them are based on developed country data as demonstrated by recent studies (Chen et al , 2022a; Chun et al , 2021; Jung and Kim, 2022; Eggert et al , 2014; Kohtamäki et al , 2013; Kharlamov and Parry, 2021; Kwak and Kim, 2016; Lombardi et al , 2022), while studies on developing and emerging markets are lagging and predominantly use Chinese data (Guo et al , 2015; Hu et al , 2021; Li et al , 2015; Zhang, 2022), other recent studies are devoted to the servitization of Indonesian (Islam and Márquez-Ramos, 2023) and Sri Lankan (Weerabahu et al , 2022) manufacturing firms.…”