IDEAS home Printed from https://ideas.repec.org/a/zbw/fubjbm/103562.html
   My bibliography  Save this article

Differential effects of product and service innovations on the financial performance of industrial firms

Author

Listed:
  • Eggert, Andreas
  • Thiesbrummel, Christoph
  • Deutscher, Christian

Abstract

Industrial companies face the particular challenge of developing new products and services in traditionally goods-centered environments. Using panel data from 558 German industrial companies, this article analyzes the financial performance consequences of product and service innovations. The analysis confirms a positive impact of product innovations on both revenue and profitability growth, whereas the profitability of an average industrial company remains unaffected by its service innovation activities, pointing to the challenge of managing the costs of service innovation in goods-centered environments. A moderation analysis provides a finer grained view: Isolating mechanisms, such as the complexity of market offerings and financial innovation barriers, disrupt the link between innovation and profitability growth for both innovation types. Specifically, they make service innovations more profitable but have detrimental effects on product innovation profitability. Factors that traditionally hinder financial success with product innovations actually provide effective safeguards for service innovations.

Suggested Citation

  • Eggert, Andreas & Thiesbrummel, Christoph & Deutscher, Christian, 2014. "Differential effects of product and service innovations on the financial performance of industrial firms," jbm - Journal of Business Market Management, Free University Berlin, Marketing Department, vol. 7(3), pages 380-405.
    • Handle: RePEc:zbw:fubjbm:103562
    as

    Download full text from publisher

    File URL: https://www.econstor.eu/bitstream/10419/103562/1/799765821.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Bowen, Frances E. & Rostami, Mahdi & Steel, Piers, 2010. "Timing is everything: A meta-analysis of the relationships between organizational performance and innovation," Journal of Business Research, Elsevier, vol. 63(11), pages 1179-1185, November.
    2. Insu Cho & Heejun Park & Joseph Kim, 2012. "The moderating effect of innovation protection mechanisms on the competitiveness of service firms," Service Business, Springer;Pan-Pacific Business Association, vol. 6(3), pages 369-386, September.
    3. Cantner, Uwe & Joel, Kristin & Schmidt, Tobias, 2011. "The effects of knowledge management on innovative success – An empirical analysis of German firms," Research Policy, Elsevier, vol. 40(10), pages 1453-1462.
    4. Gebauer, Heiko & Gustafsson, Anders & Witell, Lars, 2011. "Competitive advantage through service differentiation by manufacturing companies," Journal of Business Research, Elsevier, vol. 64(12), pages 1270-1280.
    5. Jeroen de Jong & Patrick Vermeulen, 2003. "Organizing Successful New Service Development: A Literature Review," Scales Research Reports N200307, EIM Business and Policy Research.
    6. Claudio Cozza & Franco Malerba & Maria Luisa Mancusi & Giulio Perani & Andrea Vezzulli, 2012. "Innovation, profitability and growth in medium and high-tech manufacturing industries: evidence from Italy," Applied Economics, Taylor & Francis Journals, vol. 44(15), pages 1963-1976, May.
    7. Valérie Mathieu, 2001. "Service strategies within the manufacturing sector: benefits, costs and partnership," Post-Print hal-01796269, HAL.
    8. Giulio Cainelli & Rinaldo Evangelista & Maria Savona, 2004. "The impact of innovation on economic performance in services ?," Post-Print hal-00278629, HAL.
    9. de Faria, Pedro & Lima, Francisco & Santos, Rui, 2010. "Cooperation in innovation activities: The importance of partners," Research Policy, Elsevier, vol. 39(8), pages 1082-1092, October.
    10. Wolfgang Ulaga & Werner Reinartz, 2011. "Hybrid Offerings: How Manufacturing Firms Combine Goods and Services Successfully," Post-Print hal-00642039, HAL.
    11. Bruce Tether, 2005. "Do Services Innovate (Differently)? Insights from the European Innobarometer Survey," Industry and Innovation, Taylor & Francis Journals, vol. 12(2), pages 153-184.
    12. Giulio Cainelli & Rinaldo Evangelista & Maria Savona, 2004. "The impact of innovation on economic performance in services," The Service Industries Journal, Taylor & Francis Journals, vol. 24(1), pages 116-130, January.
    13. Thomä, Jörg & Bizer, Kilian, 2013. "To protect or not to protect? Modes of appropriability in the small enterprise sector," Research Policy, Elsevier, vol. 42(1), pages 35-49.
    14. D’Este, Pablo & Iammarino, Simona & Savona, Maria & von Tunzelmann, Nick, 2012. "What hampers innovation? Revealed barriers versus deterring barriers," Research Policy, Elsevier, vol. 41(2), pages 482-488.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Jalal Rajeh Hanaysha, 2021. "An Examination of Innovation Capabilities and Corporate Reputation in Banking Sector," Jindal Journal of Business Research, , vol. 10(2), pages 199-213, December.
    2. Jalal Rajeh Hanaysha & Mohammed Emad Al-Shaikh & Shanmugan Joghee & Haitham M. Alzoubi, 2022. "Impact of Innovation Capabilities on Business Sustainability in Small and Medium Enterprises," FIIB Business Review, , vol. 11(1), pages 67-78, March.
    3. Jasna Prester & Andrea Bikfalvi & Iztok Palčič, 2022. "The Effect of Product Complexity on Servitization and Deservitization: A Multi-Country Quantitative Analysis," Sustainability, MDPI, vol. 14(19), pages 1-16, September.
    4. Morgan, Todd & Anokhin, Sergey Alexander & Wincent, Joakim, 2019. "New service development by manufacturing firms: Effects of customer participation under environmental contingencies," Journal of Business Research, Elsevier, vol. 104(C), pages 497-505.

    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. Rabetino, Rodrigo & Kohtamäki, Marko & Gebauer, Heiko, 2017. "Strategy map of servitization," International Journal of Production Economics, Elsevier, vol. 192(C), pages 144-156.
    2. Marlenne G. Velazquez-Cazares & Anna M. Gil-Lafuente & Ernesto Leon-Castro & Fabio Blanco-Mesa, 2021. "Innovation capabilities measurement using fuzzy methodologies: a Colombian SMEs case," Computational and Mathematical Organization Theory, Springer, vol. 27(4), pages 384-413, December.
    3. Hannu Littunen & Timo Tohmo & Esa Storhammar, 2021. "Innovation among SMEs in Finland: The impact of stakeholder engagement and firm-level characteristics," Journal of Entrepreneurship, Management and Innovation, Fundacja Upowszechniająca Wiedzę i Naukę "Cognitione", vol. 17(4), pages 157-196.
    4. Muller, Emmanuel & Doloreux, David, 2009. "What we should know about knowledge-intensive business services," Technology in Society, Elsevier, vol. 31(1), pages 64-72.
    5. Uzma Haroon & Mohd Noor Mohd Shariff & Mohd Sufli Yusof, 2019. "Exploring the Relationship Between Innovation Capability, Total Quality Management and SMEs Performance in Electric Fan Industry of Pakistan: Moderating Effect of Relational Learning," International Journal of Financial Research, International Journal of Financial Research, Sciedu Press, vol. 10(3), pages 353-359, May.
    6. Osman Gök & Sinem Peker, 2017. "Understanding the links among innovation performance, market performance and financial performance," Review of Managerial Science, Springer, vol. 11(3), pages 605-631, July.
    7. Santos, David Ferreira Lopes & Basso, Leonardo Fernando Cruz & Kimura, Herbert & Kayo, Eduardo Kazuo, 2014. "Innovation efforts and performances of Brazilian firms," Journal of Business Research, Elsevier, vol. 67(4), pages 527-535.
    8. Witell, Lars & Snyder, Hannah & Gustafsson, Anders & Fombelle, Paul & Kristensson, Per, 2016. "Defining service innovation: A review and synthesis," Journal of Business Research, Elsevier, vol. 69(8), pages 2863-2872.
    9. Yan, Kaining & Li, Gang & Cheng, T.C.E., 2020. "The impact of service-oriented organizational design factors on firm performance: The moderating role of service-oriented corporate culture," International Journal of Production Economics, Elsevier, vol. 228(C).
    10. Burton, Jamie & Story, Vicky M. & Raddats, Chris & Zolkiewski, Judy, 2017. "Overcoming the challenges that hinder new service development by manufacturers with diverse services strategies," International Journal of Production Economics, Elsevier, vol. 192(C), pages 29-39.
    11. Peeters, T.J.G., 2013. "External knowledge search and use in new product development," Other publications TiSEM 300ebb34-b090-4210-b95e-f, Tilburg University, School of Economics and Management.
    12. Ki H. Kang & Jina Kang, 2009. "Do External Knowledge Sourcing Methods Matter in Service Innovation? Analysis of South Korean Service Firms," TEMEP Discussion Papers 200908, Seoul National University; Technology Management, Economics, and Policy Program (TEMEP), revised Aug 2009.
    13. K. J. Wang & J. Widagdo & Y. S. Lin & H. L. Yang & S. L. Hsiao, 2016. "A service innovation framework for start-up firms by integrating service experience engineering approach and capability maturity model," Service Business, Springer;Pan-Pacific Business Association, vol. 10(4), pages 867-916, December.
    14. Matthieu Crozet & Emmanuel Milet, 2017. "Should everybody be in services? The effect of servitization on manufacturing firm performance," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 26(4), pages 820-841, December.
    15. Kindström, Daniel & Kowalkowski, Christian & Sandberg, Erik, 2013. "Enabling service innovation: A dynamic capabilities approach," Journal of Business Research, Elsevier, vol. 66(8), pages 1063-1073.
    16. Doran, Justin & Ryan, Geraldine, 2019. "Does nanotechnology research generate an innovation premium over other types of research? Evidence from Ireland," Technology in Society, Elsevier, vol. 59(C).
    17. Samul Joanna & Skapska Elzbieta & Pankov Dmitrij, 2019. "Employees’ Competences in Knowledge-Intensive Business Sector – Comparative Analysis in Two Cee Countries," Studia Universitatis Babeș-Bolyai Oeconomica, Sciendo, vol. 64(1), pages 3-15, April.
    18. Gonzalo Maldonado-Guzmán & José Trinidad Marín-Aguilar & Sandra Yesenia Pinzón-Castro, 2017. "Service Innovation in Mexican Small Business," Advances in Management and Applied Economics, SCIENPRESS Ltd, vol. 7(4), pages 1-1.
    19. Myungjin Hyun & Jieun Kim, 2021. "Challenge or opportunity? A case of tire rental servitization from financial and channel perspectives," Service Business, Springer;Pan-Pacific Business Association, vol. 15(1), pages 1-17, March.
    20. Maria de Lurdes Calisto & Soumodip Sarkar, 2017. "Innovation and corporate entrepreneurship in service businesses," Service Business, Springer;Pan-Pacific Business Association, vol. 11(3), pages 581-600, September.

    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:zbw:fubjbm:103562. 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: ZBW - Leibniz Information Centre for Economics (email available below). General contact details of provider: http://jbm-online.net/index.php/jbm/index .

    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.