Relational governance strategies for advanced service provision: Multiple paths to superior financial performance in servitization

Abstract

The ability of manufacturing companies to offer advanced services and achieve superior financial performance remains an open question in the servitization literature. One central question relates to how providers govern customer relationships to realize profits through servitization. This study addresses this question by unraveling the complex relations between advanced service provision, relational governance strategies, and the financial performance of manufacturing firms. Drawing on a dataset of 50 Swedish advanced service providers, this study uses a configurational comparative method—namely, fuzzy-set qualitative comparative analysis (fsQCA)—to identify the influence of configurations of governance conditions (i.e., service innovation, perceived switching costs, the attractiveness of alternatives, and explicit contracts) on firm performance. This study contributes through the identification of three alternative governance strategies that enable advanced service providers to benefit from service provision: 1) innovation governance strategy (high service innovation, low attractiveness of alternatives, and low use of explicit contracts); 2) relational governance strategy (high service innovation, high perceived switching costs, and low use of explicit contracts); and 3) market-based governance strategy (high service innovation, low perceived switching costs, high attractiveness of alternatives, and high use of explicit contracts). These results enrich the literature on servitization and advanced services by reflecting the need to apply diverse relational governance strategies. The results suggest multiple paths to superior financial performance.