IDEAS home Printed from https://ideas.repec.org/a/eee/tefoso/v151y2020ics0040162519313356.html
   My bibliography  Save this article

The relationship between digitalization and servitization: The role of servitization in capturing the financial potential of digitalization

Author

Listed:
  • Kohtamäki, Marko
  • Parida, Vinit
  • Patel, Pankaj C.
  • Gebauer, Heiko

Abstract

The present study investigates the effect of the interaction between digitalization and servitization on the financial performance of manufacturing companies. We challenge the simple linear assumption between digitalization and financial performance with a sample of 131 manufacturing firms and hypothesize a nonlinear U-shaped interaction effect between digitalization and servitization on financial performance. From low to moderate levels of digitalization, the interaction effect between digitalization and high servitization on company financial performance is negative and significant. From moderate to high levels of digitalization, the interplay between digitalization and high servitization becomes positive and significant, improving companies’ financial performance. The results demonstrate the need for an effective interplay between digitalization and servitization, the digital servitization. Without this interplay, a manufacturing company may face the paradox of digitalization. For managers of manufacturing companies, the study provides insights into the complex relationship between digitalization and financial performance, emphasizing the value of servitization in driving financial performance from digitalization. Thus, the study demonstrates how manufacturing companies can become data-driven by advancing servitization.

Suggested Citation

  • Kohtamäki, Marko & Parida, Vinit & Patel, Pankaj C. & Gebauer, Heiko, 2020. "The relationship between digitalization and servitization: The role of servitization in capturing the financial potential of digitalization," Technological Forecasting and Social Change, Elsevier, vol. 151(C).
    • Handle: RePEc:eee:tefoso:v:151:y:2020:i:c:s0040162519313356
    DOI: 10.1016/j.techfore.2019.119804
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0040162519313356
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.techfore.2019.119804?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Vandermerwe, Sandra & Rada, Juan, 1988. "Servitization of business: Adding value by adding services," European Management Journal, Elsevier, vol. 6(4), pages 314-324, December.
    2. David Tilson & Kalle Lyytinen & Carsten Sørensen, 2010. "Research Commentary ---Digital Infrastructures: The Missing IS Research Agenda," Information Systems Research, INFORMS, vol. 21(4), pages 748-759, December.
    3. Tonci Grubic & Ian Jennions, 2018. "Remote monitoring technology and servitised strategies – factors characterising the organisational application," International Journal of Production Research, Taylor & Francis Journals, vol. 56(6), pages 2133-2149, March.
    4. Marco Ardolino & Mario Rapaccini & Nicola Saccani & Paolo Gaiardelli & Giovanni Crespi & Carlo Ruggeri, 2018. "The role of digital technologies for the service transformation of industrial companies," International Journal of Production Research, Taylor & Francis Journals, vol. 56(6), pages 2116-2132, March.
    5. Haynes, Michelle & Thompson, Steve, 2000. "The Productivity Impact of IT Deployment: An Empirical Evaluation of ATM Introduction," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 62(5), pages 607-619, December.
    6. Wamba, Samuel Fosso & Gunasekaran, Angappa & Akter, Shahriar & Ren, Steven Ji-fan & Dubey, Rameshwar & Childe, Stephen J., 2017. "Big data analytics and firm performance: Effects of dynamic capabilities," Journal of Business Research, Elsevier, vol. 70(C), pages 356-365.
    7. Opresnik, David & Taisch, Marco, 2015. "The value of Big Data in servitization," International Journal of Production Economics, Elsevier, vol. 165(C), pages 174-184.
    8. Cenamor, J. & Rönnberg Sjödin, D. & Parida, V., 2017. "Adopting a platform approach in servitization: Leveraging the value of digitalization," International Journal of Production Economics, Elsevier, vol. 192(C), pages 54-65.
    9. Kohtamäki, Marko & Parida, Vinit & Oghazi, Pejvak & Gebauer, Heiko & Baines, Tim, 2019. "Digital servitization business models in ecosystems: A theory of the firm," Journal of Business Research, Elsevier, vol. 104(C), pages 380-392.
    10. Visnjic, Ivanka & Neely, Andy & Jovanovic, Marin, 2018. "The path to outcome delivery: Interplay of service market strategy and open business models," Technovation, Elsevier, vol. 72, pages 46-59.
    11. Martinez, Veronica & Neely, Andy & Velu, Chander & Leinster-Evans, Stewart & Bisessar, Dav, 2017. "Exploring the journey to services," International Journal of Production Economics, Elsevier, vol. 192(C), pages 66-80.
    12. Sklyar, Alexey & Kowalkowski, Christian & Tronvoll, Bård & Sörhammar, David, 2019. "Organizing for digital servitization: A service ecosystem perspective," Journal of Business Research, Elsevier, vol. 104(C), pages 450-460.
    13. Sjödin, David & Parida, Vinit & Kohtamäki, Marko, 2019. "Relational governance strategies for advanced service provision: Multiple paths to superior financial performance in servitization," Journal of Business Research, Elsevier, vol. 101(C), pages 906-915.
    14. Visnjic, Ivanka & Jovanovic, Marin & Neely, Andy & Engwall, Mats, 2017. "What brings the value to outcome-based contract providers? Value drivers in outcome business models," International Journal of Production Economics, Elsevier, vol. 192(C), pages 169-181.
    15. Michael G. Jacobides & Carmelo Cennamo & Annabelle Gawer, 2018. "Towards a theory of ecosystems," Strategic Management Journal, Wiley Blackwell, vol. 39(8), pages 2255-2276, August.
    16. Kohtamäki, Marko & Partanen, Jukka, 2016. "Co-creating value from knowledge-intensive business services in manufacturing firms: The moderating role of relationship learning in supplier–customer interactions," Journal of Business Research, Elsevier, vol. 69(7), pages 2498-2506.
    17. Michelle Haynes & Steve Thompson, 2000. "The Productivity Impact of IT Deployment: An Empirical Evaluation of ATM Introduction," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 62(5), pages 607-619, December.
    18. Frank, Alejandro G. & Mendes, Glauco H.S. & Ayala, Néstor F. & Ghezzi, Antonio, 2019. "Servitization and Industry 4.0 convergence in the digital transformation of product firms: A business model innovation perspective," Technological Forecasting and Social Change, Elsevier, vol. 141(C), pages 341-351.
    19. Rymaszewska, Anna & Helo, Petri & Gunasekaran, Angappa, 2017. "IoT powered servitization of manufacturing – an exploratory case study," International Journal of Production Economics, Elsevier, vol. 192(C), pages 92-105.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Kohtamäki, Marko & Parida, Vinit & Oghazi, Pejvak & Gebauer, Heiko & Baines, Tim, 2019. "Digital servitization business models in ecosystems: A theory of the firm," Journal of Business Research, Elsevier, vol. 104(C), pages 380-392.
    2. Bustinza, Oscar F. & Opazo-Basaez, Marco & Tarba, Shlomo, 2022. "Exploring the interplay between Smart Manufacturing and KIBS firms in configuring product-service innovation performance," Technovation, Elsevier, vol. 118(C).
    3. Tian, Jiamian & Coreynen, Wim & Matthyssens, Paul & Shen, Lei, 2022. "Platform-based servitization and business model adaptation by established manufacturers," Technovation, Elsevier, vol. 118(C).
    4. Kohtamäki, Marko & Rabetino, Rodrigo & Einola, Suvi & Parida, Vinit & Patel, Pankaj, 2021. "Unfolding the digital servitization path from products to product-service-software systems: Practicing change through intentional narratives," Journal of Business Research, Elsevier, vol. 137(C), pages 379-392.
    5. Shen, Lei & Sun, Wanqin & Parida, Vinit, 2023. "Consolidating digital servitization research: A systematic review, integrative framework, and future research directions," Technological Forecasting and Social Change, Elsevier, vol. 191(C).
    6. Mosch, Philipp & Schweikl, Stefan & Obermaier, Robert, 2021. "Trapped in the supply chain? Digital servitization strategies and power relations in the case of an industrial technology supplier," International Journal of Production Economics, Elsevier, vol. 236(C).
    7. Jovanovic, Marin & Sjödin, David & Parida, Vinit, 2022. "Co-evolution of platform architecture, platform services, and platform governance: Expanding the platform value of industrial digital platforms," Technovation, Elsevier, vol. 118(C).
    8. Kolagar, Milad & Parida, Vinit & Sjödin, David, 2022. "Ecosystem transformation for digital servitization: A systematic review, integrative framework, and future research agenda," Journal of Business Research, Elsevier, vol. 146(C), pages 176-200.
    9. Leminen, Seppo & Rajahonka, Mervi & Wendelin, Robert & Westerlund, Mika & Nyström, Anna-Greta, 2022. "Autonomous vehicle solutions and their digital servitization business models," Technological Forecasting and Social Change, Elsevier, vol. 185(C).
    10. Münch, Christopher & Marx, Emanuel & Benz, Lukas & Hartmann, Evi & Matzner, Martin, 2022. "Capabilities of digital servitization: Evidence from the socio-technical systems theory," Technological Forecasting and Social Change, Elsevier, vol. 176(C).
    11. Sjödin, David & Parida, Vinit & Kohtamäki, Marko & Wincent, Joakim, 2020. "An agile co-creation process for digital servitization: A micro-service innovation approach," Journal of Business Research, Elsevier, vol. 112(C), pages 478-491.
    12. Marko Kohtamäki & Stephan C. Henneberg & Veronica Martinez & Koji Kimita & Heiko Gebauer, 2019. "A Configurational Approach to Servitization: Review and Research Directions," Service Science, INFORMS, vol. 11(3), pages 213-240, October.
    13. Grubic, Tonci & Jennions, Ian, 2018. "Do outcome-based contracts exist? The investigation of power-by-the-hour and similar result-oriented cases," International Journal of Production Economics, Elsevier, vol. 206(C), pages 209-219.
    14. Culot, Giovanna & Orzes, Guido & Sartor, Marco & Nassimbeni, Guido, 2020. "The future of manufacturing: A Delphi-based scenario analysis on Industry 4.0," Technological Forecasting and Social Change, Elsevier, vol. 157(C).
    15. Garcia Martin, Patricia Carolina & Schroeder, Andreas & Ziaee Bigdeli, Ali, 2019. "The value architecture of servitization: Expanding the research scope," Journal of Business Research, Elsevier, vol. 104(C), pages 438-449.
    16. Chirumalla, Koteshwar & Leoni, Luna & Oghazi, Pejvak, 2023. "Moving from servitization to digital servitization: Identifying the required dynamic capabilities and related microfoundations to facilitate the transition," Journal of Business Research, Elsevier, vol. 158(C).
    17. Lei Shen & Cong Sun & Muhammad Ali, 2021. "Role of Servitization, Digitalization, and Innovation Performance in Manufacturing Enterprises," Sustainability, MDPI, vol. 13(17), pages 1-17, September.
    18. Linus Thomson & Anmar Kamalaldin & David Sjödin & Vinit Parida, 2022. "A maturity framework for autonomous solutions in manufacturing firms: The interplay of technology, ecosystem, and business model," International Entrepreneurship and Management Journal, Springer, vol. 18(1), pages 125-152, March.
    19. Yuki Inoue & Takeshi Takenaka & Takami Kasasaku & Tadafumi Tamegai & Ryohei Arai, 2023. "How to design platform ecosystems by intrapreneurs: Implications from action design research on IoT-based platform," Electronic Markets, Springer;IIM University of St. Gallen, vol. 33(1), pages 1-26, December.
    20. Zhou, Dan & Yan, Tingting & Dai, Weiqi & Feng, Junzheng, 2021. "Disentangling the interactions within and between servitization and digitalization strategies: A service-dominant logic," International Journal of Production Economics, Elsevier, vol. 238(C).

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:tefoso:v:151:y:2020:i:c:s0040162519313356. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.sciencedirect.com/science/journal/00401625 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.