How Small and Medium Sized Firms Walk the Path to Hybridity

Customers increasingly prefer the provision of comprehensive solutions over buying goods and services separately. Whereas researchers have closely studied the servitization of large manufacturers, the situation of small and medium sized firms as well as of services firms has been neglected. In contrast to the one-sided view of servitization, we propose a comprehensive view of hybridity to capture the transformation of firms from pure to hybrid products and to focus on SMEs across a wide range of sectors. Based on a survey of 190 SMEs in a highly industrialized southern German region, we find hybrid firms to be more likely than pure firms—both manufacturing and service firms—to engage in a higher scale and scope of innovation activities, to use absorptive capabilities in the appropriation of external knowledge, and to collaborate with partners in the innovation process. We argue that collaboration offers a sustainable path towards hybridity for SMEs, and that territorial hybridity can be a viable path for regions towards sustainable development.