Does the Servitization Strategy Improve the Performance of Manufacturing Enterprises in China?

Lianxing Min,Jianqiong Wang,Qian Luo

doi:10.4236/ajibm.2015.55030

Lianxing Min, Jianqiong Wang + Show 1 more

Open Access

https://doi.org/10.4236/ajibm.2015.55030

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Abstract

There is a controversy of the relationship between servitization of manufacturing and business performance in the literature. Based on the data of Hu-Shen A-share listed manufacturing enterprises in 2013, this paper examined the relationship in the above with the traditional servitization level variable(SERL) and the servitization decision variable(SERD), which was generated in a dynamic perspective of strategic decision, to measure the servitization strategy. The empirical results showed that the servitization decision was positively correlated with the market performance (Tobin’s q), and the servitization level was negatively correlated with the financial performance, including return on assets (ROA), economic value added change rate (EVAC) and earnings per share (EPS). Further, we discussed the results from the signal theory and diversification discount theory.

Highlights

It’s becoming a new trend for the traditional manufacturing enterprise adding services to products in our times
That may be the reason that why there is no significant positive correlation between servitization decision (SERD) and earnings per share (EPS). 2) The relationships between servitization level variable (SERL) and economic value added change rate (EVAC), EPS and return on assets (ROA) can be explained by diversified paradox
The view of diversified paradox is that the excessive diversification would damage the enterprise’s business performance, and it has been verified that diversification is negatively related to the ROA [25]

Summary

Introduction

It’s becoming a new trend for the traditional manufacturing enterprise adding services to products in our times. It’s necessary to reform the traditional operation mode of organization in implement process of servitization, which is seen one feature of the strategic transformation and called “service transition strategy” by scholars [9] We think it has the characteristics of the two strategies in the above. Scholars generally support the view that is the servitization strategy of manufacturing enterprise has a positive influence on its market value, but different conclusions exist about its influence on profitability. There are plenty of factors and their roles in the relationship between servitization strategy and business performance discussed in the literature, such as resource slack and industry turbulence [9], the organizational parameters and their moderating roles [12], the strategic alignment [22] and the socio-technical capability [23]. We only discuss the relationships between different indicators of servitization strategy and different aspects of business performance in this paper, and don’t consider the potential impact of other factors on the relationships

Hypotheses

Measures

Descriptive Statistics and Correlation Analysis

Model Tests

Regression Results Analysis

Conclusions