Top Management Team Impact on Servitization: Does the TMT Experience Make a Difference?

Abstract

Although servitization has considered as a strategic renewal, current research provides us very few answers how top management team (TMT) experience may enhance the firm’s degree of servitization. Building on upper echelons, strategic renewal and servitization research, this study aims to contribute to an increased understanding of the role of TMT experience in the firm’s servitization journey. We argue that an increasing focus on services goes along with substantial risks and requires the development of new organizational capabilities. As such, we argue that TMT characteristics affect strategic choices towards service-centric business models. Using data of 212 TMTs in 139 German energy utilities, we hypothesize and find evidence for positive effects of outside hires and short-tenured TMTs on the firm’s degree of servitization. For this purpose, we develop and provide future research with a novel measurement for the firm’s degree of servitization. We empirically demonstrate that TMT experience beyond the focal industry has neither a positive nor a negative effect per se on the firm’s degree of servitization, and argue that positive and negative consequences of TMT cross-industry experience may compensate each other. In proposing new research directions, we underscore the relevance of integrating determinants of managerial cognition and behaviour into servitization theorizing.