Effects of top management team faultlines in the service transition of manufacturing firms

Abstract

Manufacturing firms have increasingly begun to offer services in addition to products, a strategy known as “service transition.” Because top management team (TMT) is responsible for implementing and coordinating firm strategy, it is important to understand how the characteristics of TMT affect service transition. The objective of this study is to investigate the differential effects of product-related and product-unrelated service transitions on financial performance and the moderating roles of informational and social TMT faultlines. Analyses of secondary data from 293 manufacturing firms in China between 2003 and 2018 indicate that although product-related service transition increases financial performance (as measured by Tobin's Q), product-unrelated service transition decreases it. Informational faultlines increase these performance implications by enhancing the positive effect of product-related service transition but attenuating the negative effect of product-unrelated service transition. In contrast, social faultlines decrease these performance implications by attenuating the positive effect of product-related service transition but enhancing the negative effects of product-unrelated service transition. These findings contribute to the marketing strategy literature by providing new insights into the differential effects of TMT faultlines on service transition.