Servitization of manufacturing: the effect of economic context

Purpose - Following the identified need for more explicit contextual studies in servitization research, the purpose of this paper is to investigate the relationships between and among economic context, service provision and service return, including the service paradox. Design/methodology/approach - Firm-level and macroeconomic (country competitiveness) data are combined to operationalize the constructs considered in the study. Structural equation modeling and cluster analysis are used to investigate the direct relationships between economic context, service provision and service return, and the negative association between the development of economic context and the service paradox. Findings - The analyses confirm the general assumption that service provision has a positive direct effect on service return. Economic context seems to have no direct effect on service return and, contrary to what was expected, it has a negative impact on the intensity of service provision. Thus, service provision fully mediates the negative impact of context on service return. Finally, the service paradox occurs more frequently in less-developed economic contexts, where the probability of a relatively low service return coupled with high service provision is significantly higher. Practical implications - The study identifies five key elements of economic context that have to be incorporated into the strategic decision-making process regarding product-related services offered by manufacturers. Originality/value - The paper contributes to the contextual research of services offered by manufacturers. Subject to future empirical testing, it is proposed that a more favorable economic context offers more possibilities for manufacturers to cooperate with other business actors to provide services.