Overcoming the Service Paradox by Leveraging Organizational Design and Cultural Factors: A Combined Configuration and Contingency Approach

Abstract

Although servitization is a buzz word in the current manufacturing industry, challenges have been identified in different aspects, leading to contested performance outcomes, which make manufacturing firms hesitant to embark on the journey of servitization. In this paper, conceptualizing servitization as two service-oriented strategies, namely services supporting the product (SSP) and services supporting the clients' actions (SSC), we investigate the servitization-performance link and find that both servitization strategies have no effect on firm performance. However, given that a main-effect-only analysis provides an incomplete picture of servitization-performance relationship, considering three critical factors, namely service-oriented organizational structure (Structure), service-oriented human resource management (HR), and service-oriented corporate culture (Culture), adopting a combined configuration and contingency approach, based on analysis of data collected from 207 Chinese manufacturing firms, we find that contingent configurations, i.e., the SSP-Culture-Structure configuration and the SSC-Culture-HR configuration, are positively associated with firm performance. Our findings identify the existence of the “service paradox,” unveil the contingent configurations of servitization and three critical internal organizational elements, highlight the intrinsic attributes of the three factors in the context of servitization, and address the complex servitization effects on firm performance and the solution of the “service paradox” by making proper internal organizational changes.